Sensex Opens Firm; Bharti Airtel Gains on Merger News

Mon, 6 Mar 09:30 am

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Asian equity markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.51%, while the Hang Seng is up 0.20%. The Shanghai Composite is trading up by 0.45%. Stock markets in the US finished their previous session on a positive note.

In the meanwhile, Indian share markets have opened the day on a positive note. The BSE Sensex is trading higher by 128 points while the NSE Nifty is trading higher by 24 points. The BSE Mid Cap index and BSE Small Cap index have opened the day up by 0.3% & 0.4% respectively.

Barring information technology stocks, all the sectoral indices have opened the day in green with PSU stocks and energy stocks being the top gainers on the BSE. The rupee is trading at 66.85 to the US$.

Coal India share price opened up by 1.4% after it was reported that Central Coalfields Limited (CCL), a wholly-owned subsidiary of Coal India, approved the buy-back of equity shares not exceeding Rs 10 billion in value. The shares proposed to be bought back by the miner's subsidiary represent 5.54% of the existing paid-up capital of CCL.

Telecom stocks have opened the day in green with Tata Communications and AGC Networks being the most active stocks in this space. According to an article in a leading financial daily, Bharti Airtel and Millicom International Cellular SA have agreed to merge their telecommunication operations in Ghana (Subscription Required) with equal stakes in the combined entity.

Bharti Airtel holds 75% shares in Airtel Ghana Limited. Together, the new entity will be the second strongest operator with around 10 million subscribers, inclusive of 56% data users. The entity is expected to hold subscription of 80% population in Ghana.

The said consolidation would be done through their subsidiaries Airtel Ghana Limited and Tigo Ghana Limited and fetch revenues of nearly US$ 300 million.

With this, Bharti Airtel would be able to strengthen its portfolio in Ghana and the combination will offer better synergies. Turning around Africa is all the more important for the company faced with severe financial pressures in its largest market of India, where it is in the midst of a cut throat price war unleashed by the entry of Reliance Jio Infocomm, the reports noted.

India's telecom industry is in a state of upheaval. The new kid in town, Reliance Jio, has driven all the changes since last year. The debt laden telecom industry in India showed the first sign of consolidation.

Madhu Gupta, Managing Editor of ResearchPro, believes higher investments to upgrade infrastructure (Subscription Required) will further stretch the companies' balance sheets. Bharti Airtel has planned capital investments of Rs 600 billion called 'Project Leap' to upgrade its infrastructure and protect its home turf. Idea Cellular, on the other hand, is exploring the sale of tower assets to raise funds.

Here's a snippet of what she wrote:

• "The tariff war, no doubt, will benefit the consumer. But the profits and shareholder returns of the telecom industry will be severely crippled if the mindless battle to gain supremacy rages on."

Debt Levels of Telecom Players on an Uptrend

Bharti Airtel share price opened the day up by 1.5%.

Moving on to the news from information technology stocks. In the latest development, the US announced that in order to clear the backlog of pending visa applications, it would temporarily suspend the 'premium processing' of H-1B visas from April 3.

By paying an additional premium of US$1,225, companies could get an H-1B application processed within 15 days, whereas a standard process takes 3-6 months. The temporary suspension of the fast-track processing of the H-1B visas, widely used by the Indian IT industry may last six months.

IT industry body- National Association of Software and Services Companies (Nasscom) agreed the suspension would create some process delays for the companies but does not see it as a significant impediment.

The suspension comes considering India pressing for a fair and rational approach on the issue from a trade and business perspective. As per the reports, this move could impact companies wishing to send employees to the US on H-1B for projects on an urgent basis.

In the past few weeks, there have been proposals to overhaul the popular H-1B visa regime through various legislations which have added to the worries of the Indian IT sector. The sector is already battling slower growth, currency fluctuation and cautious client spending. The US accounts for over 60% of the Indian IT export revenues.

Tanushree Banerjee, Co-head of Research at Equitymaster is of the opinion that, Indian IT companies will need to rise to Trump's challenges. But is this so-called Trump crash a reason to act on Indian IT stocks? Here's an excerpt from the article:

• "So as long as you aren't worried about the revenue guidance in the coming quarters, you need to do just one thing: Stay vigil on valuations. And you never know, the Trump crash may be an opportunity to act on not just IT but lots of other safe stocks as well".

However, Indian IT firms must plan for the future. Such changes will have a considerable impact on the manner in which they currently do business in the US, the reports noted.

S&P BSE Information Technology Index began trading down by 0.8% with Infosys and Tech Mahindra leading the losses.

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