Telecom shares plunge on spectrum fear

Shares of telecom services provider companies such as Idea Cellular, Reliance Communications and Bharti Airtel have plunged more 3% each second day in a row after the Telecom Regulatory Authority of India (Trai) on Monday proposed a high reserve price for telecom spectrum to be auctioned, raising fears of an increase in mobile tariffs.

Trai has proposed a reserve price of Rs 3,622 crore for the auction of one megahertz of pan-India second generation (2G) spectrum in the 1800 megahertz band.

“The reserve price for auction of spectrum is close to 10 times higher than what operators had paid in 2008 for acquiring licences at Rs 1,658 crore, which came bundled with 4.4-MHz 2G spectrum. The base price for 3G spectrum was fixed at Rs 3,500 crore for five MHz in 2010, which would make the recommended price five times higher than the 3G base price," the report suggests.

Among the individual stocks, Idea Cellular has plunged 14.5% at Rs 71.20, extending its previous day’s almost 6% fall. Bharti Airtel has dipped 8% at Rs 289 and Reliance Communications by 3.4% at Rs 78.70 on the Bombay Stock Exchange.