The elimination of three% ground on SUC together with 0% SUC on spectrum acquired within the upcoming auctions may assist Indian telcos decrease their SUC fee by 250-310bps, driving annual money financial savings of Rs 7-21 bn. This will assist offset over 70% of annual spectrum installments required to purchase 100MHz block in 3.3GHz band for Bharti/Jio and supply potential upsides of 4% to truthful values for Bharti/Jio. Easing regulatory levies is a structural optimistic. Reiterate Buy on Bharti.
Govt’s clarifications on SUC: The Govt. has launched revised norms for Spectrum Usage Charge (SUC) offering clarifications on SUC relevant on spectrum acquired within the upcoming auctions. While the methodology of calculating SUC is identical as earlier, the order has eliminated the three% ground fee on SUC.
Purchase in 26GHz can drive
Rs 8-22 bn internet annual financial savings: Indian telcos maintain 80-95MHz of unpaired spectrum at blended SUC fee of two.9-3.9% (adjusted for microwave backhaul SUC) in every circle throughout bands. In the upcoming auctions, operators can purchase as much as 130MHz/1,110MHz in 3300MHz/ 26GHz bands, respectively, which can assist them decrease their blended SUC fee. A 300MHz buy of 26GHz spectrum will result in the blended SUC fee for telcos falling to sub-1% ranges leading to annual money financial savings of Rs 7-20 bn. Bharti/Jio/VIL can maximise internet financial savings at Rs 20/21/7 bn in the event that they purchase 500/500/300MHz in 26GHz band, respectively.
SUC financial savings to incentivise bids in 3300MHz band: At reserve costs, Bharti and Reliance Jio should pay an annual installment of Rs 30 bn for 20 years to amass 100MHz spectrum within the 3300MHz band on a pan-India foundation. If they purchase 500MHz in 26GHz band then their internet annual money outflow can be lowered to Rs 8-9 bn attributable to SUC financial savings, implying an over 70% discount in annual installments. SUC financial savings may also allow Vodafone Idea to amass 50MHz spectrum in 3300MHz band in 7 circles accounting for 62% of its revenues on a money impartial foundation. If it acquires 50MHz spectrum in its top-16 markets, then the web annual money outflow will nonetheless be manageable at Rs 6.5 bn.
SUC financial savings to learn Bharti/Jio: While we construct $4-bn value of spectrum buy in our estimates, we have now not baked within the potential SUC advantages. These may elevate our FY24/25 Ebitda estimates by 3-5% and our truthful worth by 4% for Bharti/Jio, respectively.
Source: www.financialexpress.com”