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Help Vodafone, Bharti, Idea may gain from 2G licence mess
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Vodafone Group and Bharti Airtel may gain customers because a scandal roiling the world’s second-largest mobile-phone market is pressuring the government to cancel licences issued to smaller carriers, analysts said.

Phone users may defect to carriers other than those identified by an audit last month as having fraudulently bought licences in 2008, said Rohit Maheshwari, an analyst at KR Choksey Shares & Securities . Idea Cellular , India’s sixthlargest operator, may also stand to gain for similar reasons, he said.

The government said this week it will give the owners of 85 phone permits two months to prove they’re entitled to keep offering services after India’s top auditor found the 2008 sale of licences deprived the treasury of as much as $30 billion. The probe has led to the resignation of the telecommunications minister, A Raja and stalled parliamentary proceedings.

“If licenses for some players get cancelled, it would certainly reduce the competitive intensity,” said Mr Maheshwari, who’s based in Mumbai . “We could see their customers shifting to established players like Bharti and Idea, which I feel could add to their profits.”

Bharti’s 10% gain since November 16, when the auditor’s report was submitted to parliament, makes it the best-performing stock in the Bombay Stock Exchange’s benchmark Sensitive Index, Sensex. IIFL Capital raised its investment rating on Bharti to “buy” from “reduce” this week, citing easing competition and reduced regulatory uncertainty.

India had 687.7 million mobile phone users at the end of September . Bharti leads with 20.8% market share, followed by Reliance Communications’ 17.1%, Vodafone’s 16.8% and Idea with 10.8%. The Comptroller and Auditor General of India said last month that the telecommunications ministry awarded 2G licences to 13 ineligible companies two years ago.
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