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M o r e h y p e t h a n s u b s t a n c e i n N T P 2 0 1 1 . . .
The Telecom Ministry has announced the draft of the New Telecom
Policy 2011. The draft on the new policy did seem to be consumer and
industry friendly and took cognizance of the need for enhanced
broadband penetration in the country and need for additional
spectrum. However, lack of clarity and strict timelines for
implementation was a dampener.
Key Highlights
• There would be a separate spectrum act with clear policies on
spectrum sharing, pooling and even trading of spectrum
• Allocation of spectrum would be delinked from telecom licenses
and be done through market mechanisms
• A “one nation – one license” strategy eliminating roaming charges
for consumers and eventual convergence of local and STD
charges. This would shave off ~4-6% of EBITDA of large
operators with Idea being most impacted. However, this would be
compensated with increase in headline tariffs and volume up tick
• “Infrastructure” status to be awarded to telecom industry, thus
making it eligible for fiscal and other incentives
• Make available additional 300 MHz spectrum for international
mobile telecommunications services by 2017 and another 200
MHz by 2020
• Frame an exit policy for telecom operators, which would further
aid in freeing up unutilised spectrum
• Review the Trai and Indian Telegraph Act
• Increase the rural teledensity to 35-60% by 2017 and 100% by
2020
• Achieve 175 million broadband connections at a minimum of 2
Mbps and up to 100 Mbps on demand by 2020
• Meet at least 80% of the telecom demand domestically by 2020.
This would help service providers bring down their costs
• Ease M&A rules for telecom service providers. However, we
believe none of the small operators are an attractive buy out
option since most of them are caught up in the 2G scam in some
way or the other
O u t l o o k
The draft has been posted on the website of DoT for feedback. After
receiving feedback, an updated version will be prepared that will be
discussed by Trai and telecom operators.
Though the draft talked about the spectrum management act and that
future spectrum would be given only through auction and conducting
regular spectrum audit, it did not mention one-time spectrum fees or
spectrum re-framing explicitly. Hence, the uncertainty regarding spectrum
pricing and fees continues. Both Bharti Airtel and Idea Cellular (under our
coverage universe) would be impacted the most by one-time spectrum
fees and spectrum re-farming. However, till further clarity emerges, we
maintain our BUY rating on Bharti Airtel and Idea Cellular with a target
price of | 450 and | 104, respectively. Though Reliance Communication
would be least impacted by spectrum pricing in the near term, we remain
cautious due to large debt and poor operating performance. We
recommend a HOLD rating on the stock with a target price of | 84.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M o r e h y p e t h a n s u b s t a n c e i n N T P 2 0 1 1 . . .
The Telecom Ministry has announced the draft of the New Telecom
Policy 2011. The draft on the new policy did seem to be consumer and
industry friendly and took cognizance of the need for enhanced
broadband penetration in the country and need for additional
spectrum. However, lack of clarity and strict timelines for
implementation was a dampener.
Key Highlights
• There would be a separate spectrum act with clear policies on
spectrum sharing, pooling and even trading of spectrum
• Allocation of spectrum would be delinked from telecom licenses
and be done through market mechanisms
• A “one nation – one license” strategy eliminating roaming charges
for consumers and eventual convergence of local and STD
charges. This would shave off ~4-6% of EBITDA of large
operators with Idea being most impacted. However, this would be
compensated with increase in headline tariffs and volume up tick
• “Infrastructure” status to be awarded to telecom industry, thus
making it eligible for fiscal and other incentives
• Make available additional 300 MHz spectrum for international
mobile telecommunications services by 2017 and another 200
MHz by 2020
• Frame an exit policy for telecom operators, which would further
aid in freeing up unutilised spectrum
• Review the Trai and Indian Telegraph Act
• Increase the rural teledensity to 35-60% by 2017 and 100% by
2020
• Achieve 175 million broadband connections at a minimum of 2
Mbps and up to 100 Mbps on demand by 2020
• Meet at least 80% of the telecom demand domestically by 2020.
This would help service providers bring down their costs
• Ease M&A rules for telecom service providers. However, we
believe none of the small operators are an attractive buy out
option since most of them are caught up in the 2G scam in some
way or the other
O u t l o o k
The draft has been posted on the website of DoT for feedback. After
receiving feedback, an updated version will be prepared that will be
discussed by Trai and telecom operators.
Though the draft talked about the spectrum management act and that
future spectrum would be given only through auction and conducting
regular spectrum audit, it did not mention one-time spectrum fees or
spectrum re-framing explicitly. Hence, the uncertainty regarding spectrum
pricing and fees continues. Both Bharti Airtel and Idea Cellular (under our
coverage universe) would be impacted the most by one-time spectrum
fees and spectrum re-farming. However, till further clarity emerges, we
maintain our BUY rating on Bharti Airtel and Idea Cellular with a target
price of | 450 and | 104, respectively. Though Reliance Communication
would be least impacted by spectrum pricing in the near term, we remain
cautious due to large debt and poor operating performance. We
recommend a HOLD rating on the stock with a target price of | 84.
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