জাতীয় মাসিক মুক্তিদূত [The Monthly Muktidooth] Print / Online media: 1/29/12

Thursday, February 2, 2012

2G licences: Why Bharti Airtel is the biggest gainer

Bharti Airtel seems to have come out clean and is likely to be the biggest beneficiary from the judgement announced by the Supreme Court. As a result of the judgement, 4.4 Mhz of 2G spectrum per circle has been freed which results in freeing up of almost 55 Mhz of spectrum. One has to wait and see how these licences are auctioned and at what price.Smaller telecom companies were making inroads in the market share of bigger companies by aggressively pricing their services. Most of the smaller companies are making operating losses as a result of this pricing strategy. This has resulted in a reduction in margin and lower client addition for most of the players in the sector. Though the smaller companies can operate for another four months, it is likely that Bharti and Idea might opt for raising tariffs for its services as the threat of competition would nBharti already has the highest number of subscribers in the country. The company as on December 2011 had 175.65 million subscribers in its fold, however, its monthly addition was slowing down. Take the case in December, while Bharti Airtel added 0.96 million subscribers, Uninor added 2.12 million. With licences of Uninor being cancelled, both Idea and Bharti are expected to benefit from the judgement as number portability can help clients to switch easily. Citigroup in a report has said that the biggest losers will be new entrants like Swan, Uninor, Sistema. They added that BhartiAirtel will be the biggest gainer as there has been no cancellation of licences for them. Moreover, with the cancellation of licences a fresh auction will take place and those prices for spectrum will be taken as base for the excess spectrum. Jagannadhan Thunuguntla, head of research, SMC Investment and Advisors, Mumbai feels Bharti Airtel and Idea Cellular will emerge as popular brands and their strong balance sheets will be clear beneficiaries because they can take advantage of this situation and increase market share. The stock gained around 7 percent at Rs 386 on likely allocation of spectrum. The shares touched an intraday high of Rs 392.95 and an intraday low of Rs 358.30. It was trading with volumes of 959,155 shares. o longer exist.

Don’t worry, be happy, says ICICI Bank but there’s just one problem

ICICI Bank has surprised the Street positively with its third-quarter results. Not only is net profit up a healthy 20 percent, its deposit and credit growth has also been quite good. Credit grew by a handsome 19 percent and Chanda Kochhar, CEO and managing director of the bank, assured that loan growth would be maintained at 18 percent for the financial year ending March 2012. She also predicted domestic credit growth for the next year at 18 to 20 percent. She said it was too early to talk about how the bank’s international portfolio of loans would perform next year. The bank’s total loan book currently stands at Rs 2,46,200 crore. Total deposits were up 19.67 percent, driven by additions in current and savings account (Casa) deposits. Casa ratio — the proportion of Casa deposits to total deposits — climbed to 43.6 percent from 42.1 percent last quarter. The bank also reported a slight improvement in net interest margin — the difference between interest received and interest paid — to 2.7 percent from 2.64 percent a year ago. Asset quality also improved significantly, with net non-performing assets coming down from 1.1 percent to 0.7 percent over the same period. Even more reassuring, provisions for possible slippages (part of loanbook that has potential to turn into bad loan) are also down. It seems the only worry for the bank lies with its restructured assets. Net restructured loans at the end of the quarter totalled Rs 3,070 crore, an increase of Rs 800 crore over the previous quarter. Kochhar said there would be more restructuring of corporate debt in coming quarters. Nevertheless, the bank’s asset quality is expected to remain under control. Quelling concerns about where credit growth had come from, Kochhar explained the growth main came from working capital requirements for companies and loans that had been sanctioned in the past but had been disbursed only recently. She added that project, however, were now taking longer to start and loan sanctions for new projects had also slowed down. In such a scenario, an interest rate cut or more liquidity into the system cannot be the real fix. The investment situation definitely has to improve for the bank to maintain its current form. For now, the Street is celebrating the bank’s upbeat performance: the stock ended 5.87 percent at Rs 902.