The sector has underperformed the Sensex by nearly 35 %.
A price war and higher than expected 3G fees is hitting companies on profitability and balance sheet fronts.
While cash flows are likely to take care of interest and expansion costs, the good news is that operating metrics seem to be improving.
An Anand Rathi report says June quarter results indicate the wireless business is back on a sustainable growth path, the declining trend in revenues per minute is stabilising, and there is robust growth in minutes (volumes).
If consolidation plays out, as expected in the next 18-24 months, expect competitive pressures to reduce and pricing power to return.
The key downside risks are price wars in the post-paid segment with the implementation of mobile number portability and implementation of Trai recommendations on spectrum usage.
Best Bets: If the bullish scenario prevails, expect a 30 % return on Bharti, Reliance Communications and Idea from these levels.
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