Today’s pick is BHARTIARTL [stockquote]BHARTIARTL[/stockquote]. The stock started the year with a down-trend, that lasted until September, where it got support at Rs. 250 levels. Since then it has been on an uptrend and it saw a 52 week high of Rs. 370 in mid-January. In the last three months, the stock has moved +20% vs. +4% of the Nifty’s.

BHARTIARTL technical analyis chart

Oscillator RSI and CMO are nearing the over-sold territory. The stock is trading close to the lower end of Bollinger band giving an upward bias. Short-term technical just saw a 18×9 bearish cross-over.

The MACD line and the signal line are moving away from each other and suggest the short –term downtrend to continue. Also, both long-term and short-term GMMA lines are very close to each other not giving any long-term direction to the stock.

BHARTIARTL correlation chart

BHARTIARTL’s average correlation with the Nifty is 0.49 which is positive. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

BHARTIARTL volatility chart

BHARTIARTL has a historical volatility in the range of 0.4 to 0.7. The scrip’s volatility is currently in the middle of the range.

Given these technicals, we suggest a short-term sell. For the long-term, we will have to wait and watch how the GMMA lines unravel themselves and a bullish call can be made if it holds the current trendline. However, we suggest having trailing stop-losses in case sudden trend-reversal were to take place.

Read what experts have to say about the Indian telecom sector here.

Indian Telecom: Hope at last?

The telecom sector is finally beginning to turn the corner after a difficult two years that was marked by weak operational performance, record low tariffs due to intense competition and regulatory hurdles.

Late last month, India’s biggest mobile carrier Bharti Airtel and Idea Cellular Ltd slashed discounts and freebies on offer to customers, effectively raising calling costs for mobile users. Vodafone India, the second biggest operator, has also hinted at raising tariffs.


Earlier in September, RCom had raised tariffs by 25% for both post-paid and pre-paid customers. Since these top four operators account for nearly half of mobile phone users in the country, more than 400 million subscribers will have to shell out more by way of mobile bills.

With the exit of players like Etisalat, Swan Telecom and Videocon, consolidation has already begun giving room for large operators to hike tariffs. The tariff hikes will come as a huge relief for the industry struggling with increasing regulatory costs and weak pricing power.

To improve their operational efficiency, many telcos have deactivated inactive subscribers and instead turned focus towards retaining active users rather than aggressively acquiring new ones. The move reflects an operational shift from volume/subscriber growth to increased focus on pricing/margin front.

On the regulatory front, liabilities with regards to one-time spectrum fee and spectrum re-farming are now clear although the exact payout is yet to be determined. News agency PTI has estimated that the government may get around Rs 23,177 crore by way of one-time spectrum fee from operators.


Spectrum re-farming would mean another blow for incumbent operators as re-allotment of spectrum in a higher frequency band will lead to higher capital investment to maintain current service levels.

If 2012 was a year of regulatory uncertainty, 2013 will be a year of a string of litigation as telcos are likely to contest several decisions like abolition of roaming charges, invalidity of 3G roaming agreements and spectrum re-farming.

The three leading operators and the government are fighting it out in the courts on offering 3G services in areas where they do not hold 3G spectrum. Even the reduction of up to 50% in the reserve price of spectrum in the 800 megahertz (MHz) band, used by CDMA operators, has irked GSM operators.

Removal of roaming charges, if implemented, will hit telcos further as earnings from roaming and STD charges will vanish. Coupled with higher re-farming costs of spectrum, tariffs will only rise further from the current levels despite TRAI’s warning that it may intervene in pricing by fixing a cap.


But the biggest turnaround will come once data revenues start picking up as earnings from voice services have stagnated. Future growth will revolve around data services through 3G and broadband wireless services. While currently, high pricing and higher cost of handsets are a major deterrent, accessibility will improve going forward and that would drive average revenues per user.

In short, it all depends on how telcos navigate regulatory headwinds and avoid a race to the bottom on the pricing front. Exciting times ahead!

[stockquote]BHARTIARTL[/stockquote] [stockquote]RCOM[/stockquote] [stockquote]IDEA[/stockquote]


Today’s pick is BHARTIARTL [stockquote]BHARTIARTL[/stockquote]. The stock began 2012 with a nick of an uptrend, which ended with the stock touching its 52-week high of Rs. 400 in February. This was then followed by a correction to Rs. 250 levels seen in September. The stock has since been on an up-trend. In the last three months, the stock has moved +18% vs. +4% of the Nifty’s.

BHARTIARTL Technical analysis chart

Oscillators RSI and CMO are in no-man’s land. However, the short-term technical flashed a 4×18 bullish cross-over for the scrip yesterday followed by a long-term golden cross on the 28th of December giving a prominent bullish sign for the scrip.

The MACD line that just started moving up towards the signal line, along with the rise in histogram levels, is suggesting an imminent bullish move. Also, long-term GMMA lines are experiencing an expansion giving out a bullish signal for the scrip.

BHARTIARTL Correlation chart

BHARTIARTL’s average correlation with the Nifty is 0.48 is positive. The scrip will be replicating the movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

BHARTIARTL Volatility chart

BHARTIARTL has a historical volatility in the range of 0.4 to 0.7. The scrip’s volatility currently is in the middle of the range.

To conclude, given these technicals, the stock is both a short-term and long-term BUY.

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Will mobile ARPU finally rise?

The Economist has a handy chart on the effect of the Supreme Court’s ruling on different telecom operators:


Least we forget, the ham handed sale of 2G spectrum had the perverse effect of unleashing a price war as the new acquirers of below market spectrum went on a customer acquisition tizzy. Airtel was the biggest loser with ARPU sliding from Rs. 292 in 2008 to Rs. 187 in Q3 2011.


The new entrants – Uninor, S Tel and later Videocon were willing to work at Rs. 15-40 ARPU to gain market-share. But with them gone had having to bid for spectrum in an auction, the old schoolers – Airtel, Vodafone, Aircel and RCom – should be able to increase ride the “reversion to mean” of mobile subscription rates.

Airtel–dropped calls come back to bite

English: Logo of Airtel

Image via Wikipedia

The carnage in Airtel stock continues – down close to 10% since their results were announced. Their Revenue Per Minute (the amount they charged you) increased by 3.2% while minutes rose only 0.8% And the worst part is that Idea’s minutes grew 7.3% during the same period, in spite of those annoying Abhishek Bachan ads.

I am not sure which network traders are on, but having suffered through Airtel’s network for the better part of three years: no signal, dropped calls, annoying ring-tones, having to pay to talk to a customer service rep, being told that I had to buy a Rs. 20,000 “booster” to fix the lack of network around my house; it comes as no shock to me that people “used” less minutes. I have lost track of the number of times I’ve carried the rest of a conversation on Skype because Airtel dropped the call.

I guess all of those dropped calls finally translated to a disappointing quarter.

The stock is hovering around Rs. 350 now. It was around Rs. 320 in early Jan so I’m tempted to say that a correction was overdue and I’m actually warming up to a bull case here.

You can read all the news stories about Airtel here.