Is telecom headed for a duopoly? Here’s what brokerages say

ET Bureau|
Survival in doubt?
1/7

Survival in doubt?

The telecom industry may be headed for a duopoly comprising Bharti Airtel and Reliance Jio, brokerages said following a Supreme Court decision to dismiss a petition seeking a review of its judgment on adjusted gross revenue. Brokerages believe that Airtel's recent $3 billion-fund raising gives it the liquidity to withstand the AGR shock, while it will be critical to see the way ahead for Vodafone Idea, which has AGR-related dues of more than Rs 53,000 crore. Analysts also said the chances of a curative petition being admitted are slim.

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Brokerage Take
2/7

Brokerage Take

Edelweiss has maintained buy rating on Bharti Airtel with a target price of Rs 533 and IIFL has cited Reliance Industries and Bharti Airtel as its top picks in the telecom sector. While Vodafone Idea shares plunged 25% to end at Rs 4.51 on Friday following the verdict, Bharti Airtel's shares jumped 5.5% to Rs 500 and Reliance Industries' stock gained nearly 3% to Rs 1,580.65.

Here's what brokerages are saying on the way forward for the telecom industry:

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Edelweiss
3/7

Edelweiss

-Market would turn into duopoly in absence of any government intervention

-Government intervention not ruled out given consequences of further consolidation in telecom

-Chances of curative petition being admitted are slim


IIFL
4/7

IIFL

-Government may spread out payments over long period to avoid pushing Vodafone Idea into NCLT

-Chances of relief from curative petition before January 23 deadline look remote

-Bharti Airtel and Reliance Industries are top picks in sector

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Jefferies
5/7

Jefferies

-Telecom companies will likely file a curative petition

-Govt is likely to provide relief by allowing staggered payments over a longer timeline

-Best case for lenders is Vodafone Idea survives long enough and repays loans back

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Morgan Stanley
6/7

Morgan Stanley

-SC dismissal of review petition filed by Airtel and Vodafone Idea could cause the AGR-related liabilities to devolve

-Airtel's recent $3 billion-fund raising gives it liquidity to meet this eventuality, will be critical to see way forward for Vodafone

-There is possibility of further industry consolidation to two players-Airtel and Reliance Jio

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Motilal Oswal
7/7

Motilal Oswal

-SC verdict may put severe burden on telecom companies

-There could be a payment extension or moratorium to say the least

-Bharti Airtel and Reliance Jio appear poised for strong market share gains


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