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The DoT (in a separate document than the NTP 2011-draft) responded to
TRAI’s spectrum management and licensing recommendations. On balance
we believe DoT is supportive of M&A, spectrum sharing and has raised
interesting questions about spectrum pricing. Balancing these positives
however, negatively the DoT has not dismissed spectrum re-farming or a oneoff
“excess” spectrum charge and has suggested a higher license fee than
TRAI’s recommendation. We believe this document provides insight into the
direction the DoT is taking with respect to the key issues which were left
outstanding from the NTP 2011 draft. As we have highlighted earlier, the
outcome is unlikely to be unilaterally positive but support for M&A, questions
on spectrum pricing are welcome.
Spectrum pricing – questions raised: DoT has raised several queries on
spectrum pricing and has asked TRAI to reconsider the current price
recommended. While we still await the “current price”, we are encouraged
to see the detailed inspection here. If this process leads to a more rational
“current price” for 2G spectrum, it would be positive for a potential excess
spectrum payout and for payment at the time of renewal of spectrum.
M&A and spectrum sharing supported: We view DoT’s stance as more
supportive of M&A in the sector than TRAI’s May 2010 recommendations
were – a key positive development, in our view. DoT has also questioned the
rationale for restrictions on spectrum sharing such a limited timeframe, a cap
on the spectrum held and a higher effective usage charge.
License fee impact less positive: The DoT has recommended a uniform fee
of 8.5% of AGR be charged vs. TRAI’s recommendations of a reduction
from 6-10% paid today to a uniform 6%. We estimate that the potential
savings for Bharti are reduced from Rs34/share to Rs4/share and for Idea
from Rs18/share to Rs3/share. This is not new information but still negative
in our view. This is negative for IP-I and ISP players too.
Spectrum re-farming remains a risk: TRAI has recommended that
spectrum in the 900MHz band be re-farmed for 1800Mhz. We believe the
DoT acknowledges the complexity of re-farming and we believe that lack of
sufficient 1800Mhz spectrum may lead to a delay or dismissal of this
recommendation. However until then, it is a potential negative for the GSM
incumbents who have strongly opposed re-farming in the past. Also
negatively, the DoT does not see any financial support for the private sector
for re-farming.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
The DoT (in a separate document than the NTP 2011-draft) responded to
TRAI’s spectrum management and licensing recommendations. On balance
we believe DoT is supportive of M&A, spectrum sharing and has raised
interesting questions about spectrum pricing. Balancing these positives
however, negatively the DoT has not dismissed spectrum re-farming or a oneoff
“excess” spectrum charge and has suggested a higher license fee than
TRAI’s recommendation. We believe this document provides insight into the
direction the DoT is taking with respect to the key issues which were left
outstanding from the NTP 2011 draft. As we have highlighted earlier, the
outcome is unlikely to be unilaterally positive but support for M&A, questions
on spectrum pricing are welcome.
Spectrum pricing – questions raised: DoT has raised several queries on
spectrum pricing and has asked TRAI to reconsider the current price
recommended. While we still await the “current price”, we are encouraged
to see the detailed inspection here. If this process leads to a more rational
“current price” for 2G spectrum, it would be positive for a potential excess
spectrum payout and for payment at the time of renewal of spectrum.
M&A and spectrum sharing supported: We view DoT’s stance as more
supportive of M&A in the sector than TRAI’s May 2010 recommendations
were – a key positive development, in our view. DoT has also questioned the
rationale for restrictions on spectrum sharing such a limited timeframe, a cap
on the spectrum held and a higher effective usage charge.
License fee impact less positive: The DoT has recommended a uniform fee
of 8.5% of AGR be charged vs. TRAI’s recommendations of a reduction
from 6-10% paid today to a uniform 6%. We estimate that the potential
savings for Bharti are reduced from Rs34/share to Rs4/share and for Idea
from Rs18/share to Rs3/share. This is not new information but still negative
in our view. This is negative for IP-I and ISP players too.
Spectrum re-farming remains a risk: TRAI has recommended that
spectrum in the 900MHz band be re-farmed for 1800Mhz. We believe the
DoT acknowledges the complexity of re-farming and we believe that lack of
sufficient 1800Mhz spectrum may lead to a delay or dismissal of this
recommendation. However until then, it is a potential negative for the GSM
incumbents who have strongly opposed re-farming in the past. Also
negatively, the DoT does not see any financial support for the private sector
for re-farming.
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