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We once again reiterate that the investors should exit from Indian Telecom stocks. To quote from our post published on 05.10.2009 ( Very next day Telecom stocks started tumbling)
“First time in the history of Indian Telecom sector, ARU (Average Revenue per User) falls below Rs.200. Voice services are no longer remunerative. Number portability would put more pressure on profitability on existing players. 3G services may not see the day light in the near future. Raja may not be the King in this time. TRAI may advice all the players to offer “ per second billing” to it’s customers. This alone shave 20% of voice call profitability. This time lobbying may not help one or two companies alone or rescue laggards.
We advice long-term investors to exit Indian Telecom stocks including Bharathi and RCOM. Difficult times ahead.”
Number portability would be come in to force from January 2010 and the cost to the subscriber is only Rs.19. We expect lot of churning in the highly lucrative “Post Paid” segment. This would again put huge pressure on margins. Already “roaming charges” started to tumble. There are news that TRAI is going to regulate “SMS” charges. Telecom companies are literally cheating customers and deriving super-normal profit that too with out paying any licence fees. This would soon going to end. If BSNL goes ahead with 30paisa/video (3G calls) calls, Telcom operator may not get windfall profits from 3G also. Next few years would be very difficult even for cash positive Bharati. Damage is already done. Exit all Telecom stocks. Bargain hunting in the Telecom space may be injurious to your wealth.