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India: Telecom Services
Equity Research
Draft NTP on Oct 10?; Free national roaming; no spectrum pricing
Details of Draft New telecom policy 2011 as per media articles
Bharti (BRTI.BO, Buy, Rs367.05) and Idea (IDEA.BO, Buy, Rs94.55) stock
prices are down 4.19%/7.72% vs. Sensex up 2.63% today, we believe on
concerns related to the Draft New Telecom Policy. Although the Draft New
Telecom Policy is widely expected on 10
th
Oct ‘11, we do not expect
spectrum pricing issues to be discussed in it (based on our conversations
with industry participants). As per CNBC, the key topics discussed in the
draft NTP are nation-wide free roaming, framework for exit policy for
operators to surrender license and setting up of a Telecom Finance
Corporation to facilitate investment in the sector. In addition, CNBC
reported the telecom ministry is planning to allow inter-circle-MNP and the
Ministry is mulling to incorporate a framework to increase the availability
of spectrum for telecom services, to provide one national license across the
country and to permit sharing of networks.
Nationwide free roaming puts 5-6% of revenues at risk
If free nationwide roaming is introduced then we see 5-6% of cellular
revenues at risk for Bharti/Idea and c 7-8% of EBITDA at risk as these
revenues have higher margins. However we note that discussions are in
draft stage and there is no timeline/visibility on if/when it will get
implemented. We believe a rational exit policy will facilitate M&A and
hence would likely reduce further competitive intensity in the market.
Draft policy unlikely to discuss spectrum pricing in our view
Based on our discussions with industry participants we see a low
possibility on excess spectrum pricing discussed in NTP as there is limited
visibility on valuation for excess 2G spectrum. Based on TRAI’s Feb-11
recos, the impact of excess spectrum (immediate one time payment) on
Bharti/Idea is Rs 10.9/Rs 4.8 per share and on license renewal (NPV) is Rs
22.0/Rs.18 per share.
Consensus miss risks/Nigeria business impact also NT concerns
The other key concerns for Bharti/Idea are risks of consensus miss in 2Q
(our 2Q estimates are 30.5%/16.8% below consensus for Bharti/Idea) and
Airtel services in Nigeria impacted as sacked workers grounded the
network and impacted services (as per media articles e.g. All Africa). Bharti
mgmt mentioned in a press release that it has not sacked any employees.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India: Telecom Services
Equity Research
Draft NTP on Oct 10?; Free national roaming; no spectrum pricing
Details of Draft New telecom policy 2011 as per media articles
Bharti (BRTI.BO, Buy, Rs367.05) and Idea (IDEA.BO, Buy, Rs94.55) stock
prices are down 4.19%/7.72% vs. Sensex up 2.63% today, we believe on
concerns related to the Draft New Telecom Policy. Although the Draft New
Telecom Policy is widely expected on 10
th
Oct ‘11, we do not expect
spectrum pricing issues to be discussed in it (based on our conversations
with industry participants). As per CNBC, the key topics discussed in the
draft NTP are nation-wide free roaming, framework for exit policy for
operators to surrender license and setting up of a Telecom Finance
Corporation to facilitate investment in the sector. In addition, CNBC
reported the telecom ministry is planning to allow inter-circle-MNP and the
Ministry is mulling to incorporate a framework to increase the availability
of spectrum for telecom services, to provide one national license across the
country and to permit sharing of networks.
Nationwide free roaming puts 5-6% of revenues at risk
If free nationwide roaming is introduced then we see 5-6% of cellular
revenues at risk for Bharti/Idea and c 7-8% of EBITDA at risk as these
revenues have higher margins. However we note that discussions are in
draft stage and there is no timeline/visibility on if/when it will get
implemented. We believe a rational exit policy will facilitate M&A and
hence would likely reduce further competitive intensity in the market.
Draft policy unlikely to discuss spectrum pricing in our view
Based on our discussions with industry participants we see a low
possibility on excess spectrum pricing discussed in NTP as there is limited
visibility on valuation for excess 2G spectrum. Based on TRAI’s Feb-11
recos, the impact of excess spectrum (immediate one time payment) on
Bharti/Idea is Rs 10.9/Rs 4.8 per share and on license renewal (NPV) is Rs
22.0/Rs.18 per share.
Consensus miss risks/Nigeria business impact also NT concerns
The other key concerns for Bharti/Idea are risks of consensus miss in 2Q
(our 2Q estimates are 30.5%/16.8% below consensus for Bharti/Idea) and
Airtel services in Nigeria impacted as sacked workers grounded the
network and impacted services (as per media articles e.g. All Africa). Bharti
mgmt mentioned in a press release that it has not sacked any employees.
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