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KOCHI, April 2

PURE investment play saw the share prices of telecommunication service provider Bharti Tele-Ventures Ltd (BTVL) jump up by almost 11.5 per cent on the BSE and NSE today.

With rumours of the interconnectivity issue between Bharti Tele and Reliance being resolved, market interest was sustained at the counter. Bharti Tele had been in the news recently for throwing its hat in the WLL versus cellular operators case against Reliance.

Market gurus pointed out that following the FIPB rejection of BTVL's proposal, envisaging acquisition of shares up to $5 million from the secondary market by another Bharti group company, it is possible that promoters' interest could have fuelled the activity.

The stock closed at Rs 32.60, up 11.65 per cent, with 2,10,738 shares traded on the BSE and at Rs 32.40, up 11.34 per cent, with around 6,53,497 shares traded on the NSE.

However, with more than three million mobile subscribers as of February, BTVL continues to dominate the cell scene. Given its presence in 15 circles, the company has reaped maximum benefits from the sharp spurt in demand for mobile services. Currently, it commands a market share of 25 per cent. The nearest competitor is Hutch (14 per cent), which is predominantly focussed in urban markets.

Sources maintain that the telecom industry is not pegged on purely price play. It is more to do with comforts in terms of services offered, quality etc. And BTVL scores on that ground. Despite industry projections of a 25 per cent drop in tariff in the fiscal year 2004, there appears to be strength in BTVL model.

"Quality of execution, speedy rollout and access to capital are the factors that make up the qualitative composition of the telecom industry. And of the three, access to capital is an important factor. In this case, BTVL has consistently proved that it can bring in funding in equity and debt at lower rates," the sources said.

However, going forward, increasing competition, tariff cuts, free cell-to-cell incoming calls and the shifts in terms of calling pattern, will sift the weak from the strong.

"The threat of competition from WLL will continue to have a negative impact on cellular players. Already the airtime reduction in the third quarter of fiscal year 2003 has resulted in blended revenues (average of pre-paid and post-paid) falling by six per cent to Rs 767 per month per user. Further reduction will add to the pressure on margins," an analyst said.

However in the case of Bharti, for the third quarter the average blended monthly minutes per user increased by eight per cent with the rise in post-paid customers being more significant - 24 per cent in a single quarter.

According to analysts, what one needs to watch out for is how fast and how sharply the incumbents such as Tata's and BSNL react. "So far the regulatory muddle has prevented subscriber base growth in the case of Reliance. And the delay in rollout has worked in favour of BTVL. The important question that needs to be asked now is whether BTVL has the strength to emerge as the front-runner in the industry. Can it really dominate the market given the growing competition in the industry," questioned an industry watcher.

While analysts remain bullish on BTVL, in the long run, given the high-risk profile of telecom stocks, caution would appear to be the byword amongst them.

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