3G spectrum awarded on time

Thu, 2 Sep 11:30 am

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After starting today’s session on a positive note Indian indices have managed to hold on their gains. Other key Asian markets are trading in the positive territory as well with Nikkei (up 1.5%) leading the gainers. Currently heavyweights in the Sensex are trading strong with stocks from the consumer durables and auto space witnessing strong buying interest. However, stocks from IT space are trading weak while FMCG stocks are trading flat.

Currently, the BSE-Sensex is trading up by around 75 points, while the NSE-Nifty is up by about 20 points. Strong buying interest is witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 1.1% and 1.3% respectively. The rupee is trading at 46.79 to the US dollar.

Software stocks are trading mixed with Tech Mahindra and Aptech leading the gains. Patni and TCS are however trading weak. TCS recently announced that its UK Business Process Outsourcing (BPO) subsidiary Diligenta bagged two life and pension contracts worth Pound 250 m (around Rs 18 bn). The contracts come from the Phoenix Group and Old Mutual International. This was following the transfer of Unisys Insurance Services UK life and pensions services business to Diligenta. This new contract with Phoenix Group has been extended by 6 additional years until 2018. Both contracts will generate Pound 250 m in revenues for the company over the period. This helps in reinforcing the subsidiary’s position as one of the largest BPO providers in the UK. The number of policies Diligenta administers will now rise from 3.6 m to over 5 m.

Telecom stocks are trading strong with AGC Networks and HFCL leading the gains.  However, Idea and RCom are trading weak. Sticking to the deadline of 01 September, the government has allotted 3G spectrum to all the winning bidders at the recently concluded auction. Spectrum has been allotted to all 7 winners namely Bharti Airtel, RCom, Idea Cellular, Vodafone, Aircel, STel and Tata Teleservices. It should be noted that state run telcos BSNL and MTNL were allotted the frequency prior to these private players but they had to match the winning bid prices. The 3G auction yielded Rs 677 bn from the winning players, including BSNL and MTNL. However, none of the players were able to bag Pan-India spectrum.

With the allocation of spectrum the commercial launch of 3G services is expected to happen by the end of this year or early next year. As per the regulations, the operators would be able to use the spectrum for 20 years. The government has also imposed a roll out obligation under which the service providers will have to cover at least 90% of the service areas within metros over a period of 5 years.