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Telecom - Sector impact: Neutral
Most telecom policies are driven by departments such as the Department of Telecom
(DoT) and the Telecom Regulatory Authority of India (TRAI). The budget typically does
not have a significant impact on the telecom sector. Key positives from the budget for
the sector include the continued focus on rural broadband and a decrease in surcharge
on corporate taxes. The negatives include a marginal increase in MAT and the
budgeting of receipt of INR296b from the sector, which comprises recurring spectrum
and license fees, potential BWA spectrum auctions and one-time fees collected from
new entrants, among others.
We think the increase in MAT from 18% to 18.5% will be the most negative for
RCOM and Idea. However, this will be offset by a decrease in surcharge from 7.5%
to 5%, which will lead to a decline in the effective tax rate from 19.93% to 19.46%.
The budget plans to provide Rural Broadband Connectivity to all 250,000
Panchayats (local government bodies) in the country in three years. Incremental
growth for the telecom sector is coming from rural subscribers. Focus on rural
spending is positive for incumbent telecom operators such as Bharti and Idea,
which have deeper coverage in rural India.
The government is budgeting receipt of INR296b from the telecom sector.
Recurring spectrum and license fees could account for ~INR140b of the INR296b.
The balance will be recovered from a potential BWA spectrum auction and onetime
entry fee collected from new entrants, among others.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Telecom - Sector impact: Neutral
Most telecom policies are driven by departments such as the Department of Telecom
(DoT) and the Telecom Regulatory Authority of India (TRAI). The budget typically does
not have a significant impact on the telecom sector. Key positives from the budget for
the sector include the continued focus on rural broadband and a decrease in surcharge
on corporate taxes. The negatives include a marginal increase in MAT and the
budgeting of receipt of INR296b from the sector, which comprises recurring spectrum
and license fees, potential BWA spectrum auctions and one-time fees collected from
new entrants, among others.
We think the increase in MAT from 18% to 18.5% will be the most negative for
RCOM and Idea. However, this will be offset by a decrease in surcharge from 7.5%
to 5%, which will lead to a decline in the effective tax rate from 19.93% to 19.46%.
The budget plans to provide Rural Broadband Connectivity to all 250,000
Panchayats (local government bodies) in the country in three years. Incremental
growth for the telecom sector is coming from rural subscribers. Focus on rural
spending is positive for incumbent telecom operators such as Bharti and Idea,
which have deeper coverage in rural India.
The government is budgeting receipt of INR296b from the telecom sector.
Recurring spectrum and license fees could account for ~INR140b of the INR296b.
The balance will be recovered from a potential BWA spectrum auction and onetime
entry fee collected from new entrants, among others.
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