Telecom stocks, including those of market leader Bharti Airtel, jumped on Tuesday as analysts pointed that the bidding intensity in the ongoing spectrum auction has reduced drastically.
Bidding price for the premium 900MHz, which can carry both voice services as well as high-speed 3G data and has more reach than the 1800 and 2100 MHz bands on offer, rose just 1 per cent on Monday. Analysts also said that telecom firms will hike tariffs to recoup the high prices they are likely to pay for buying spectrum.
Prashasta Seth of domestic brokerage IIFL said telecom companies will increase tariffs to offset higher cash outflow for buying spectrum.
Analysts said for a company like Bharti Airtel the entire amount spent for buying 900 MHz spectrum can be recovered by profits earned in just four years. The spectrum will be allocated for 20 years.
"Markets are overreacting on negative side especially because telecom firms are expected to hike tariffs... the payback comes a lot quicker," said SV Prasad of Chime Consulting.
Bharti Airtel shares were up over 11 per cent at day's high. Other telecom stocks also jumped sharply; Idea Cellular traded 7 per cent higher, Tata Teleservices rose 6 per cent and Reliance Communications gained over 5 per cent.
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