Reeling under stiff competition and a decline in average revenue per user (ARPU) over the past one year, the stock prices of the two leading telecom operators in India have something to cheer about — probable stake sale by Reliance Communications and Bharti Airtel completing the acquisition of Zain. But can this last?
Bharti Airtel’s share price rose by 6.1 per cent on Wednesday after the company announced completion of Zain acquisition and Reliance Communications has witnessed a 22 per cent rise in its share price over the past six trading sessions after the company’s board agreed to sell 26 per cent stake in the company to a strategic investor.
“There is nothing that has changed dramatically for the telecom industry and the pressures on the front of competitive tariffs, declining trend in ARPU continue,” said Jaideep Ghosh, executive director at KPMG.
The current rise in prices is on account of the money that can be raised by Reliance Communications and booster for Bharti Airtel on completion of its acquisition, say experts.
There is a consolidation on the cards and some tough time for the industry in the short to medium term.
“While the Indian telecom market looks attractive for the long term, I see the situation to remain very tough for the industry over the next two to three years,” said another telecom expert.
“I think there will be consolidation over the next 24-30 months and there will be 6-8 players who will then rise the growth path.”