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UBS Investment Research
India Mobile Sector
NTP 2011 – A step towards consolidation
„ Indian telecom minister has outlined the framework of new telecom policy
On Saturday, Indian telecom minister, Mr. Kapil Sibal, outlined the broad
framework for new telecom policy (NTP 2011). The key provisions of new policy
are: 1) spectrum will be delinked from license 2) 2G spectrum to be awarded on
market determined price 3) new operators need to pay for spectrum beyond
4.4MHz while incumbents will have to pay for spectrum beyond 6.2MHz 4) there
will be a uniform rate for revenue sharing and 5) M&A guidelines to be revised.
„ UBS view: New framework to ease consolidation in the sector
1) We believe that NTP 2011 will facilitate consolidation in the sector as business
case for new operators was already challenging and it has become even more
unviable now as they will have to pay market prices for spectrum beyond 4.4Mhz.
2) Also, though the minister has not specifically mentioned about renewal of 2G
spectrum, we believe that existing operators may have to pay market prices for 2G
spectrum on renewal given that spectrum has been delinked from license. Bharti
may have to pay Rs90-Rs180bn upon renewal while Idea may have to pay Rs65-
Rs132bn. Our SoTP based valuations for Bharti and Idea could reduce by Rs12-
Rs25 and by Rs9-Rs17 resp after adjusting for projected spectrum amount payable
during renewal (Please see tables 3 & 4 for more details). We have not done
analysis for RCom as most of its GSM licenses have been issued recently.
„ Maintain our Buy rating on Bharti, Idea and RCom
Given the improving pricing environment and regulatory outlook, we strongly
believe that Indian mobile sector can outperform in 2011. We change our top-pick
from Bharti to Idea as Idea offers pure play exposure to Indian mobile sector.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Mobile Sector
NTP 2011 – A step towards consolidation
„ Indian telecom minister has outlined the framework of new telecom policy
On Saturday, Indian telecom minister, Mr. Kapil Sibal, outlined the broad
framework for new telecom policy (NTP 2011). The key provisions of new policy
are: 1) spectrum will be delinked from license 2) 2G spectrum to be awarded on
market determined price 3) new operators need to pay for spectrum beyond
4.4MHz while incumbents will have to pay for spectrum beyond 6.2MHz 4) there
will be a uniform rate for revenue sharing and 5) M&A guidelines to be revised.
„ UBS view: New framework to ease consolidation in the sector
1) We believe that NTP 2011 will facilitate consolidation in the sector as business
case for new operators was already challenging and it has become even more
unviable now as they will have to pay market prices for spectrum beyond 4.4Mhz.
2) Also, though the minister has not specifically mentioned about renewal of 2G
spectrum, we believe that existing operators may have to pay market prices for 2G
spectrum on renewal given that spectrum has been delinked from license. Bharti
may have to pay Rs90-Rs180bn upon renewal while Idea may have to pay Rs65-
Rs132bn. Our SoTP based valuations for Bharti and Idea could reduce by Rs12-
Rs25 and by Rs9-Rs17 resp after adjusting for projected spectrum amount payable
during renewal (Please see tables 3 & 4 for more details). We have not done
analysis for RCom as most of its GSM licenses have been issued recently.
„ Maintain our Buy rating on Bharti, Idea and RCom
Given the improving pricing environment and regulatory outlook, we strongly
believe that Indian mobile sector can outperform in 2011. We change our top-pick
from Bharti to Idea as Idea offers pure play exposure to Indian mobile sector.
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