Telecom: Relief on a major regulatory overhang - AMBIT

The Telecom Regulatory Authority of India (TRAI) lowered the caps to roaming rates effective from 1 July 2013 to account for the lower costs associated with providing roaming services. The listed incumbents (Bharti and Idea) are unlikely to be materially affected, because the rates provided by these companies are already largely in line with the prescribed rates.

The revenue impact for FY14E is likely to be ~1.0-1.5% owing to the mandated reduction in incoming call rates and outgoing sms rates for roaming services. This estimated impact does not account for the expansion in MoU due to lower costs. The possible abolishment of roaming charges was a major regulatory overhang on the industry, with significant implications on the revenues of incumbents. TRAI's order could temporarily alleviate these concerns.

We retain our BUY stance on Bharti and our SELL stance on Idea. We remain positive on the industry outlook due to the ongoing industry consolidation.

Source : Equity Bulls

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