Why Bharti Airtel has lost 17% in August

India’s largest mobile phone carrier by subscribers, Bharti Airtel, was the top Nifty loser for a second straight day today after brokerages Morgan Stanley and Credit Suisse joined the bandwagon in downgrading the stock.

While Credit Suisse slashed its target price oto Rs 220 citing high downside risk over the next 12 months and competition from Reliance Infotel which would enter the wireless voice market, Morgan Stanley downgraded Bharti Airtel to “equal-weight” from “overweight” and cut its target price by nearly 25 percent to Rs 280.

According to Reuters data, An investment of Rs 100,000 n Bharti Airtel at start of this month would be worth Rs 83,000 s today as the stock has lost almost 17 percent in August.

Morgan Stanley said traffic growth was coming at the expense of operating margins as tariff wars in the sector bring down average revenue per minute for voice calls. 3G rates have also been slashed in the past six months, while overall sequential data revenue growth is declining, it added.

Credit Suisse said Mukesh Ambani promoted Reliance Infotel could enter the wireless voice market, posing a significant risk to the telecom industry’s business model. The unit of Reliance Industries was expected to only enter the Indian wireless data market, but Credit Suisse said Reliance Infotel would benefit from also entering the voice market, increasing competition in a segment in which Bharti Airtel is one of the top players.

Bharti has seen a slew of downgrades including Morgan Stanley, Goldman Sachs, Standard Chartered following disappointing quarterly earnings.

Moreover, 2G spectrum auctions over the next four to six months pose significant risks to the business models of incumbent telcos.“This raises the possibility of RIL Infotel participating in the upcoming 2G auction,” said Credit Suisse.

Also it does not help that the Indian telecom industry is among the most spectrum-starved in the world. The auction, expected in November, will have an additional impact of Rs 40 on Bharti’s shares, said the brokerage. “Any hopes of a tariff increase post the auction could prove utopian, due to high price elasticity in the subscriber base and the fact that a large part of the spectrum burden is going to be felt by incumbents in the near term rather than the marginal players (thanks to the deferred payment rule),” it said.

Bharti has seen a slew of downgrades including Morgan Stanley, Goldman Sachs, Standard Chartered following disappointing quarterly earnings.

The stock is currently trading 3 percent lower at Rs 251.10 on the BSE.