In its latest report on the relief package for telcos cleared by the Union Cabinet last evening, Deutsche Bank said: "Idea/Vodafone mergeco benefits the most among the larger players as the extension of tenor would lead to 30 per cent lower annual instalment on spectrum for the mergeco which has the highest leverage among the larger players."
The government, last evening, offered some relief to financially-stressed telecom sector, allowing telcos to pay for spectrum over 16 years instead of 10 years and also permitted them to hold more airwaves.
"Further, the mergeco was exceeding the older spectrum cap in a few key markets and hence the enhanced cap allows the mergco to retain all its spectrum," Deutsche Bank report said.
It noted that during the last three auctions, the government had allowed the payment of spectrum bids as a combination of upfront amount (25 to 33 per cent of bid) with the balance permitted via 10 annual instalments after a a two year moratorium.
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"Idea/Vodafone mergecos annual instalment stands at around Rs 160 billion (Rs 16,000 crore) compared to a current annualised EBITDA of Rs 100 billion (Rs 10,000 crore). For Bharti, the instalment and annualised EBITDA for India operations stand at around Rs 90 billion (Rs 9,000 crore) and Rs 230 billion (Rs 23,000 crore), respectively," the report said.
Newcomer Reliance Jios annual instalment stands at around Rs 45 billion (Rs 4,500 crore), it noted.
Morgan Stanley in a research note said that decision to give more time to telcos to pay for the spectrum they have bought, will provide some relief to the free cash flows of the operators in the near term.
Goldman Sachs observed that the spectrum cap increase to will aid consolidation and help Idea the most, and potentially also Jio.
"Idea and Vodafone, as per earlier regulations, had 45.4 MHz (2 x 22.7 MHz) of excess spectrum across all service areas put together (2.5 per cent of total spectrum), which they would have to surrender given the previous governments merger and acquisition guidelines," Goldman Sachs said.
With the increase in spectrum caps, such spectrum can now be retained by Idea, it added.
The Cabinet allowed companies to hold up to 35 per cent of all the available spectrum or airwave in a circle or telecom zone. The present limit for such holding is 25 per cent.
It also removed the current intra-band cap. Instead, an operator will be allowed to hold no more than 50 per cent of the total available spectrum in sub-1 GigaHertz bands of 700 MegaHertz, 800 MHz and 900 MHz.
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