Bharti Airtel share price tumbles after Adani enters 5G auction

Bharti Airtel's stock price is down 5% on Monday afternoon. In the last year, the stock has given over 25% returns to investors, compared to 3% NIFTY50 returns. What has led to the fall, and what should investors do now? Let us look at the reasons for the same.

Why is Airtel stock down?

• Investors fear that the entry of Adani into the telecom space may lead to another round of disruption in the market.
• However, Adani Group has clarified that its intention to acquire 5G spectrum is to provide a private network for airports and its ports business and not provide mass telecom services.
• However, as per experts, even if they don't foray into the telecom space, they will have their own telecom infrastructure, and they won't take the services of telecom companies once 5G is rolled out in India.
• It is expected that Bharti Airtel (and Jio) as the telecom companies, will lose a good amount of corporate business. 
• Hence, the share prices of Bharti Airtel are down.

5G Mega Auction

• The government has put 72 GHz of 5G frequencies for sale. At base prices, it could net up to Rs 4.5 lakh crore. The airwaves will be auctioned for 20 years across 10 bands ranging from 600 Mhz to 26 GHz at prices recommended by the telecom regulator.
• Four companies - Bharti Airtel, Reliance Jio, Vodafone Idea NSE, and an Adani Group entity have put in applications to participate in India's first auction of 5G airwaves starting July 26.
• The surprise name on the list is Adani Group.
• The Adani entity would require a Unified Access Service (UAS) permit from the Department of Telecommunications (DoT) to participate in the 5G airwaves sale.

Impact on Airtel: Brokerage take

According to Motilal Oswal Financial Services, even if the Adani Group plans to foray into the Mobility space, the 5G spectrum alone may be unviable to offer its consumer's network coverage. A pure 5G investment does not validate a full-fledged Telecom foray.

The firm added that other possibilities for Adani Group are to acquire the passive networks of GTL and RCOM, and active network or spectrum pacts – an inter-company roaming (ICR) arrangement with IDEA, or a greenfield network layout. However, all of this will be a Herculean task. Acquiring IDEA in the current form and shape too may require over Rs 2,500 billion in capital investment.

How are other Telecom stocks doing?

Vodafone Idea gained 4% in the intra-day trade, while the state-owned company Mahanagar Telephone Nigam Limited surged 18%, and GTL and Indus Towers jumped 5% and 2%, respectively.