Reliance Jio launch: Shares of Airtel, Idea Cellular plunged 30% in five months

Disruptive technology from Reliance Jio has hit telecom stocks. Shares of incumbent operators, Bharti Airtel and Idea Cellular, have fallen close to 30 per cent over the past five months on concerns over launch of Reliance Jio’s 4G operations that may shake the telecom space.
Analysts have turned negative on this space on worries over increased rivalry which may hurt profitability of the companies. On the other hand, shares of data enablers like RCom, Bharti Infratel, TataCom, which are leasing infrastructure to RJio, have outperformed the market.
“We have a cautious view on shares of telecom operators as they are likely to face a number of structural issues going ahead,” said Viju KGeorge, analyst at JP Morgan.
Reliance Jio’s long-awaited start is expected to disrupt tariffs as it seeks to wean away lucrative data customers from existing companies with its 4G services. Jio is also expected to bundle cheap devices with the content that it has access to, posing a threat to incumbents such as Bharti Airtel and Idea Cellular, said analysts.
Bharti group chief Sunil Mittal in a recent interview to ET said, “Reliance Jio Infocomm’s proposed launch is driving consolidation in the telecom sector and will intensify pricing pressure, but Bharti Airtel is prepared to meet all competition.”
Shares of Bharti Airtel have dropped 28.2 per cent, while Idea Cellular have declined 27.3 per cent over past five months and both the stocks have underperformed the BSE 100 index which has declined 10 per cent.
However, shares of data enablers who are leasing infrastructure to RJio like RCom have surged 18.5 per cent over the same period, while Bharti Infratel, Tata Communication have fallen about 10 per cent each during the same time. Still these stocks have outperformed the market.