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Telecoms
We do not expect Union Budget FY12 to have any direct significant
impact on the telecoms sector, as most key issues for the industry
(spectrum policy, regulatory levies, M&A) are likely to be addressed
outside the Budget, possibly as part of the National Telecoms Policy,
2011.
Fig 22 – Tax rates assumed in our models
Expected Measures Impact Company
Continuation of Sec 80IA income-tax benefits after M&A Positive All telcos
Clarification of tax treatment regarding 3G amortization Marginally
Positive
Bharti, RCom, Idea
Plans to use USO funds for rural/BB coverage Long-Term
Positive
Telcos with rural/broadband
focus (Bharti, Idea)
Source: Anand Rathi Research
Expectations
The telecoms sector has sought Sec 80 IA income-tax benefits to be
continued even after a company has entered an M&A transaction. This
could aid consolidation and would be positive for the sector. The
government may issue clarifications on allowing amortisation of the 3Gspectrum
fee as a deductible expense for income-tax purposes.
The government may announce concrete plans to utilise the Universal
Service Obligation (USO) funds to boost rural telecoms connectivity (e.g.,
broadband penetration); this would be only marginally positive for listed
telcos. Industry has also sought auction of more spectrum on the lines of
3G-spectrum auctions.
There have been industry representations to conduct more spectrum
auctions, reduce regulatory levies on the sector and extend Sec 80 IA
benefits. However, issue related to spectrum auctions and regulatory levies
are likely to be addressed outside the Budget. Besides, demands pertaining
to extension of Sec 80 IA benefits are unlikely to be accepted, given the
past reluctance of the government to consider the issue.
Impact on the sector
We do not see any significant impact of the Union Budget on the sector.
Allowing continuation of Sec 80 IA income-tax benefits even after a
company has entered an M&A transaction could aid industry consolidation.
However, effective consolidation would require many changes to many
other telecom regulations (M&A norms, spectrum issues). Plans for
utilisation of USO funds would be marginally positive for the broadband
segment.
Companies affected
Allowing continuation of Sec 80 IA tax benefits after an M&A would be
positive for all listed telcos (Bharti, RCom, Idea, TTML) due to increase in
prospects for industry consolidation. Plans for utilisation of USO funds
would be marginally positive for the telcos in the fixed-line broadband
business (Bharti, RCom). Clarifications on tax treatment of 3G fee
amortisation would be marginally positive for all telcos.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecoms
We do not expect Union Budget FY12 to have any direct significant
impact on the telecoms sector, as most key issues for the industry
(spectrum policy, regulatory levies, M&A) are likely to be addressed
outside the Budget, possibly as part of the National Telecoms Policy,
2011.
Fig 22 – Tax rates assumed in our models
Expected Measures Impact Company
Continuation of Sec 80IA income-tax benefits after M&A Positive All telcos
Clarification of tax treatment regarding 3G amortization Marginally
Positive
Bharti, RCom, Idea
Plans to use USO funds for rural/BB coverage Long-Term
Positive
Telcos with rural/broadband
focus (Bharti, Idea)
Source: Anand Rathi Research
Expectations
The telecoms sector has sought Sec 80 IA income-tax benefits to be
continued even after a company has entered an M&A transaction. This
could aid consolidation and would be positive for the sector. The
government may issue clarifications on allowing amortisation of the 3Gspectrum
fee as a deductible expense for income-tax purposes.
The government may announce concrete plans to utilise the Universal
Service Obligation (USO) funds to boost rural telecoms connectivity (e.g.,
broadband penetration); this would be only marginally positive for listed
telcos. Industry has also sought auction of more spectrum on the lines of
3G-spectrum auctions.
There have been industry representations to conduct more spectrum
auctions, reduce regulatory levies on the sector and extend Sec 80 IA
benefits. However, issue related to spectrum auctions and regulatory levies
are likely to be addressed outside the Budget. Besides, demands pertaining
to extension of Sec 80 IA benefits are unlikely to be accepted, given the
past reluctance of the government to consider the issue.
Impact on the sector
We do not see any significant impact of the Union Budget on the sector.
Allowing continuation of Sec 80 IA income-tax benefits even after a
company has entered an M&A transaction could aid industry consolidation.
However, effective consolidation would require many changes to many
other telecom regulations (M&A norms, spectrum issues). Plans for
utilisation of USO funds would be marginally positive for the broadband
segment.
Companies affected
Allowing continuation of Sec 80 IA tax benefits after an M&A would be
positive for all listed telcos (Bharti, RCom, Idea, TTML) due to increase in
prospects for industry consolidation. Plans for utilisation of USO funds
would be marginally positive for the telcos in the fixed-line broadband
business (Bharti, RCom). Clarifications on tax treatment of 3G fee
amortisation would be marginally positive for all telcos.
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