Govt control, rates may mar telecom growth: India Infoline

Bharti has declared its first quarter results, which have been much above street expectations. Will this stock set the telecom sector buzzing?

Bhavesh Gandhi, Telecom Analyst, India Infoline expects Idea to post a 45% topline growth, but single-digit profit growth because of higher interest costs.

He would bet on R-Comm and Bharti as the top two stocks to get into. He added that besides interest rates, regulatory concerns, in terms of 3G auctions and spectrum for new players, may impact the telecom sector.

Excerpts from CNBC-TV18's exclusive interview with Bhavesh Gandhi:

Q: What is your take on Bharti’s numbers and where do you think the stock is placed right now?

A: The topline and bottomline was on the stronger side for Bharti, especially, if you look at the operating matrix like the minutes of usage and Average Revenue Per User (ARPU). Both were on a good footing especially in minutes, which is comforting because typically, both the June as well as September quarters are supposed to be relatively leaner in terms of telecom usage. ARPU decline was just 2%, which was comforting.

Q: What about Idea? What's the call on what one can expect from the numbers?

A: Idea should see a 45% topline growth and but the profits should be in single-digit growth YoY because of higher interest costs. Both of these stocks look equally good from the current valuations.

Q: What would be your preferred list if you were to go out and buy these telecom stocks at current levels? What would be the preferred order in R-Comm, Bharti and Idea?

A: R-Comm and Bharti would be our top two bets.

Q: How would you rate R-Comm’s deal call off with MTN at this point of time for the stock?

A: There are both plus and minus on the stock, in the sense that some overhang was on the stock due to uncertainty. But on the whole, R-Comm could have got a better deal.

Q: So do you think there is a case of R-Comm to rally a bit from these levels and approach the Rs 550-600 mark?

A: That would depend on the results they come out with. But the stock has already rallied from Rs 420 to the Rs 500 levels. So one should wait for the results.

Q: Given the phase of growth, the telecom companies are witnessing right now, what is the key concern point that you think can impact earnings in this financial year or in the coming financial year?

A: Bharti and R-Comm are already impacted by the higher interest rates. So interest rate is one thing and second would be on the regulatory front, in terms of 3G auctions and other things like spectrum for new players. These two things need to be looked at.

Disclosure:

I don’t hold any of the stocks discussed.