Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Telecoms
DoT accelerates BWA spectrum process; we expect bidding
intensity to be meaningfully lower
In our view, proceeds from the auction of additional BWA
spectrum will be c40% lower than in previous auctions
We do not rule out the possibility of some incentives for BWA
players; existing BWA players are likely to expedite launch
We continue to like Bharti Airtel (BRTI.BO, INR397, OW)
The Department of Telecommunication (DoT) is working to expedite the process of
auctioning broadband spectrum (BWA) at the earliest possible time. The move is an
attempt by the government to achieve its fiscal deficit target of 4.6%, in our view. We see
Vodafone, Bharti Idea Cellular and Tata DoCoMo as the only possible bidders for the
additional BWA spectrum and believe auctions are at least six months away.
Bidding intensity likely to be lower this time: We expect bidding intensity to be
meaningfully lower for the following reasons: (a) QUALCOMM’s willingness to sell its
BWA spectrum; (b) consideration of intra-circle roaming arrangements by existing BWA
players (excluding RIL) given their limited funding options and fragmented BWA
spectrum holdings; (c) players’ stretched balance sheet across the board; and (d) no rollout by existing BWA players despite progress on the TD-LTE and receipt of spectrum.
These factors are unfavourable signs for BWA spectrum auctions, in our view. In
addition, operators will need to factor in the possibility of auctioning the spectrum in
700 MHz (even though it is difficult to estimate the timing) as 700 MHz spectrum has the
potential to provide BWA players with meaningful capex savings. To sum up, we believe
these auctions are likely to result in c40% lower proceeds than previous BWA auctions,
which is negative for existing BWA players, in our view (refer to Figure 3).
Policy incentive, accelerated rollout and negative for CDMA players: In an attempt to
improve auction proceeds, we think the government may consider relaxing the present
restrictions on VOIP or/and announce incentives for BWA players (possibly a tax
holiday). We believe the government’s intention to go ahead with the auctions is likely to
put pressure on existing players to roll out BWA services, in an attempt to benefit from
early-mover advantage. This also raises the possibility of earlier-than-expected sector
consolidation, as the large BWA players have no ready infrastructure to deploy these
services. An immediate launch by BWA players could negatively affect CDMA players
that have been pushing data cards aggressively.
Outlook and stock conclusion: We like Bharti (BRTI.BO, INR397, OW) given its highquality subscriber base (c90% active subscribers, highest active subscriber market share of
25%) and potential for improvement in voice realisation. A key downside risk would be
acceptance of TRAI recommendations in the current format
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian Telecoms
DoT accelerates BWA spectrum process; we expect bidding
intensity to be meaningfully lower
In our view, proceeds from the auction of additional BWA
spectrum will be c40% lower than in previous auctions
We do not rule out the possibility of some incentives for BWA
players; existing BWA players are likely to expedite launch
We continue to like Bharti Airtel (BRTI.BO, INR397, OW)
The Department of Telecommunication (DoT) is working to expedite the process of
auctioning broadband spectrum (BWA) at the earliest possible time. The move is an
attempt by the government to achieve its fiscal deficit target of 4.6%, in our view. We see
Vodafone, Bharti Idea Cellular and Tata DoCoMo as the only possible bidders for the
additional BWA spectrum and believe auctions are at least six months away.
Bidding intensity likely to be lower this time: We expect bidding intensity to be
meaningfully lower for the following reasons: (a) QUALCOMM’s willingness to sell its
BWA spectrum; (b) consideration of intra-circle roaming arrangements by existing BWA
players (excluding RIL) given their limited funding options and fragmented BWA
spectrum holdings; (c) players’ stretched balance sheet across the board; and (d) no rollout by existing BWA players despite progress on the TD-LTE and receipt of spectrum.
These factors are unfavourable signs for BWA spectrum auctions, in our view. In
addition, operators will need to factor in the possibility of auctioning the spectrum in
700 MHz (even though it is difficult to estimate the timing) as 700 MHz spectrum has the
potential to provide BWA players with meaningful capex savings. To sum up, we believe
these auctions are likely to result in c40% lower proceeds than previous BWA auctions,
which is negative for existing BWA players, in our view (refer to Figure 3).
Policy incentive, accelerated rollout and negative for CDMA players: In an attempt to
improve auction proceeds, we think the government may consider relaxing the present
restrictions on VOIP or/and announce incentives for BWA players (possibly a tax
holiday). We believe the government’s intention to go ahead with the auctions is likely to
put pressure on existing players to roll out BWA services, in an attempt to benefit from
early-mover advantage. This also raises the possibility of earlier-than-expected sector
consolidation, as the large BWA players have no ready infrastructure to deploy these
services. An immediate launch by BWA players could negatively affect CDMA players
that have been pushing data cards aggressively.
Outlook and stock conclusion: We like Bharti (BRTI.BO, INR397, OW) given its highquality subscriber base (c90% active subscribers, highest active subscriber market share of
25%) and potential for improvement in voice realisation. A key downside risk would be
acceptance of TRAI recommendations in the current format
No comments:
Post a Comment