As Reliance Jio rings in louder with 4G launch, investors disconnect Bharti Airtel, Idea stocks

Shares of private telecom companies bore the brunt of frenzied investor selling Thursday, amid worries cheaper data tariff and free voice and roaming charges to be offered by Reliance Jio will hurt the profitability of the incumbents going ahead. Even as the broad market sentiment displayed a sluggish trend with a negative bias, investors collectively lost over Rs 11,000 crore in two telecom stocks, Bharti Airtel and Idea Cellular. [caption id=“attachment_2771550” align=“alignleft” width=“380”]  Reuters[/caption] Shares of Bharti Airtel, India’s largest telecom company, tanked 9 percent before trimming some losses to trade 6.4 percent lower at Rs 310.60 a share. The steep fall in the stock eroded Rs 8,500 crore worth of investor wealth in Bharti Airtel to Rs 124,139 crore. Similarly, Idea Cellular, too, came under severe bear hammering, as the stock intra-day hit a 52-week low of Rs 85, down 9 percent from previous close. While the stock continues to reel, and dropped 8.3 percent to Rs 85.75, the company’s market-cap eroded by Rs 2,800 crore to Rs 30,896 crore. Although, Tata Teleservices (Maharashtra) is comparatively a smaller player in the country’s clustered telecom space, investors still cut their position in the stock leading to a fall of nearly 2 percent at Rs 6.25 apiece. Investors fear the bruising telecom data tariff war with the launch of Reliance Jio’s 4G services starting 5 September will lead to a cut-throat competition for winning back customers amongst these players. Earlier this week, telecom operators Airtel, Vodafone and Idea cut their tariff and bundled free calls with data to drive mass market adoption. Market leader Bharti Airtel on Monday announced two plans with data tariffs effectively lower by an eye-catching ‘80 per cent’. Voice revenue growth has picked up in the last two quarters driven by strong volumes and stabilising tariffs, a PTI report said. However, slowing data growth has become a concern for telcos, with revenue growth down to 32 percent in first quarter as compared to 72 percent in the same period a year ago. Earlier today, Mukesh Ambani, Chairman of RIL, at the company’s 42nd Annual General Meeting (AGM) said Reliance Jio will offer free voice and roaming charges for its customers, besides bringing down data charges as low as 5 paisa per MB. Ambani also announced a ‘free welcome offer’ for Jio customers from 5 September 5 till 31 December. Reliance Jio will offer users data services free for four months, after which it will offer 10 tariff plans starting at Rs 19 a day for occasional users, Rs 149 a month for low data users and Rs 4,999 a month for heavy data users. The billionaire industrialist said Jio is targeting 100 million users in a shortest possible time, while the company also announced “super-affordable” handsets under the LYF brand starting Rs 2,999. Ambani said: “Customers should pay for only one service, voice or data not both…. Worldwide operators charge only for data, and voice and messages are free… All voice calls for Jio customer will be absolutely free… The era of paying for voice calls is ending. Jio will usher India into the new era.” Under the free welcome offer, which Ambani termed as the largest introductory offer anywhere in the world, the company is offering free data, voice and video “to everyone absolutely free” starting 5 September till 31 December, 2016. (Disclosure: Firstpost is part of Network18 Media & Investment Limited which is owned by Reliance Industries Limited.)