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Bharti to benefit most from 3% SUC, 85bps margin gain likely

On a weighted average (including 2300 MHz), Bharti‘s SUC may fall to 3.8-3.9 percent from 5-5.2 percent, say analysts. As per Credit Suisse estimates, Bharti may see 85 basis points (bps) EBITDA margin benefit by it.

June 08, 2016 / 11:28 IST
     
     
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    Moneycontrol Bureau Bharti Airtel is likely to benefit most from the telecom commission's decision to levy 3 percent spectrum usage charge (SUC) of adjusted gross revenue on telecom operators in future auctions. This is lower than 5 percent average which the telecom companies are currently paying. The government's decision is seen as incentivising telecom companies in upcoming auctions.Credit Suisse says that the move will fetch margin benefit for Bharti Airtel’s India business while nothing changes for Idea and Vodafone. Shares of Bharti Airtel jumped 2 percent intraday on Wednesday. The telecom commission also decided that final charge will be calculated on weighted average on basis of when the spectrum was acquired and in which band, including 2300MHz. Auctioned in 2010, 2300 MHz is currently charged separately at 1 percent SUC. Bharti and Reliance Jio are the only telcos currently holding it. So, on a weighted average (including 2300 MHz), Bharti’s SUC may fall to 3.8-3.9 percent from 5-5.2 percent, say analysts. As per Credit Suisse estimates, Bharti may see 85 basis points (bps) EBITDA margin benefit by it.However, in order to protect government revenues, it is proposed that the SUC will never fall below the current absolute SUC paid out. So, Credit Suisse feels it may take three years (or longer if growth slows) for the full 85 bps benefit to play for Bharti assuming growth continues at 10 percent levels. The brokerage firm says the math for Reliance Jio is not clear since full details of how Reliance Communication's spectrum will be shared/traded is not known. “But we believe the eventual blended SUC would be the lowest in the industry at 3 percent of net revenues (100bps lower than Bharti, due to highest share of low cost 2300 spectrum),” it adds. At 09:25 hrs Bharti Airtel was quoting at Rs 354.80, up Rs 5.65, or 1.62 percent on the BSE.Posted by Nasrin SultanaFollow @NasrinzstoryDisclaimer: Reliance Jio is a part of Reliance Industries that owns Network 18 Media & moneycontrol.com

    first published: Jun 8, 2016 09:09 am

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