>India Wireless Sector (CITI)

TDSAT Order – Too Little Too Late and A Non-Event

■ Rights over 6.2Mhz? — While stating that the GSM operators don’t have rights beyond 6.2MHz, in the same breadth TDSAT has termed the interim subs criteria as “reasonable” and even questioned the need to give additional licenses and hinted at relaxed M&A rules. Given that allotted spectrum is unlikely to be taken back, worst case involves payment of a one-time fee,
which given upcoming elections and legal challenges carries implementation risk. A one-time spectrum fee, assuming 4Mhz of excess spectrum allotted to Bharti and Rs16.5bn paid for pan-India 6.2MHz spectrum, comes to ~Rs11bn (Rs6/share). We therefore think the market’s negative reaction to this news is unjustified. Bharti remains our Top Pick.

■ Relaxation in M&A norms, the way out — TDSAT, in the same order has also questioned the need to allocate new licenses given existing high competition, spectrum scarcity and low spectrum allotment/operator. It has therefore hinted to the DoT for relaxed M&A norms to achieve required spectrum efficiency.

■ New sub-based spectrum criteria – ad hoc but reasonable — While coming down on TRAI for lack of transparency on its revised subscriber linked spectrum allocation criteria, it also has held the interim criteria to be “reasonable”.

■ Technology neutrality — TDSAT has stated that dual technology existed in the license terms and as such didn’t find anything irregular in grant of GSM spectrum to RCOM/Tata-Tele. Although this removes the hangover on RCOM, we believe that too much water had flown under the bridge for TDSAT to have decided otherwise.

To see full report: INDIA WIRELESS SECTOR