Telecom shares gain on TRAI recommendations

Bharti Airtel, Idea Cellular and Reliance Communications are trading higher by 3-5% on the BSE.

Shares of telecom services provider such as Bharti Airtel, Idea Cellular and Reliance Communications (RCom) have rallied up to 5% on the bourses the Telecom Regulatory Authority of India (TRAI) proposed a 37% reduction in base price for upcoming mobile phone spectrum auction.

The sharp reduction in base/reserve price of spectrum comes after the government failed to attract many buyers in the previous two auctions.

The move is expected to attract the telecom companies that had kept away from the earlier spectrum auctions in key circles like Mumbai, Delhi and Karnataka, citing high base price.

The recommendations are favorable to the existing players who acquired license prior to 2008. This will benefit incumbent players such as Bharti Airtel and Vodafone, who currently own this spectrum.

The incumbent operators’ licenses expire in 2014 after which they will have to buy back spectrum through an auction. A higher reserve price would have made the acquisition very expensive, says analyst at Angel Broking in a note.

Among the individual stocks, Bharti Airtel and Idea Cellular have rallied 5%e each at Rs 330 and Rs 166 respectively, while RCom was up nearly 3% at Rs 144 on BSE.