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India
Telecommunications
Quick Comment: What We
Expect from the New
Telecom Policy
The Indian government will announce the
much-awaited National Telecom Policy (NTP) on
Monday, Oct 10. Our Attractive view on the Indian
telecom industry remains unchanged, and we
continue to highlight Idea Cellular as our top pick.
What's new: The Press Information Bureau website has
posted an invitation to the media for a press conference
to announce the draft NTP-2011 at 2PM on Oct 10. We
believe the NTP should address: 1) one-time excess
spectrum charges; 2) license renewal fees; 3) annual
license fee reduction; and 4) re-farming related issues.
Additionally, it should also give a longer term direction to
the remaining issues like broadband, M&A, spectrum
and tower sharing.
What is in our numbers? Based on the TRAI
recommendation of Feb 9, 2011, we estimate excess
spectrum charges for spectrum in excess of 6.2MHz to
amount to US$790mn (Rs9/share), US$17mn
(Rs0.4/share) and US$322mn (Rs4.4/share) for Bharti,
RCom and Idea, respectively, which we already include
in our price targets. Additionally, we estimate that the
NPV of the 2G spectrum renewal charges for Bharti,
RCom and Idea amounts to US$2.1bn, US$930mn and
US$1.7bn, respectively. We have taken 50% of this,
which amounts to Rs14, Rs10 and Rs12 per share
respectively, in our base case target price calculations.
In our bear case, the impact would double for each
company (Exhibit 1). We would not be surprised if the
government only announces the excess spectrum
charges for the operators on Monday.
We believe these regulatory payouts have already
been factored into the stock prices. Bharti and Idea
are currently trading at forward P/cash EPS multiple of
~7x and ~8x, which is below their historical averages.
Rcom is trading at 0.3x price to book, which is the lowest
among our coverage.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India
Telecommunications
Quick Comment: What We
Expect from the New
Telecom Policy
The Indian government will announce the
much-awaited National Telecom Policy (NTP) on
Monday, Oct 10. Our Attractive view on the Indian
telecom industry remains unchanged, and we
continue to highlight Idea Cellular as our top pick.
What's new: The Press Information Bureau website has
posted an invitation to the media for a press conference
to announce the draft NTP-2011 at 2PM on Oct 10. We
believe the NTP should address: 1) one-time excess
spectrum charges; 2) license renewal fees; 3) annual
license fee reduction; and 4) re-farming related issues.
Additionally, it should also give a longer term direction to
the remaining issues like broadband, M&A, spectrum
and tower sharing.
What is in our numbers? Based on the TRAI
recommendation of Feb 9, 2011, we estimate excess
spectrum charges for spectrum in excess of 6.2MHz to
amount to US$790mn (Rs9/share), US$17mn
(Rs0.4/share) and US$322mn (Rs4.4/share) for Bharti,
RCom and Idea, respectively, which we already include
in our price targets. Additionally, we estimate that the
NPV of the 2G spectrum renewal charges for Bharti,
RCom and Idea amounts to US$2.1bn, US$930mn and
US$1.7bn, respectively. We have taken 50% of this,
which amounts to Rs14, Rs10 and Rs12 per share
respectively, in our base case target price calculations.
In our bear case, the impact would double for each
company (Exhibit 1). We would not be surprised if the
government only announces the excess spectrum
charges for the operators on Monday.
We believe these regulatory payouts have already
been factored into the stock prices. Bharti and Idea
are currently trading at forward P/cash EPS multiple of
~7x and ~8x, which is below their historical averages.
Rcom is trading at 0.3x price to book, which is the lowest
among our coverage.
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