Budget and Telecom

2 Feb 2023 , 01:47 PM

• FY23 Telecom receipt has been revised upward from Rs528bn to Rs688bn. FY24 budgeted Telecom receipt has been set quite high, at Rs895bn.
• Based on telcos’ rev. share payments to the government and instalments on past auctions, a realistic estimate of Telecom receipt for both the years comes to Rs410bn. This approximately implies a gap of Rs278bn/Rs485bn in FY23/24.
• On the other hand, we also note that capital expenditure of DoT has sharply gone up to Rs542bn/Rs617bn in FY23/24 from the FY18-22 average run-rate of Rs~50bn.
• Our industry interactions suggest that BSNL-relief package related items (some of which are non-cash transactions such as conversion of dues into equity, allotment of 4G spectrum against equity infusion, etc.) are showing up both on the capital expenditure side and receipt side of the budget.
• If there is a fresh spectrum auction in FY24 and Bharti acquires 10MHz of 700MHz for Rs400bn, the government would realise ~Rs40bn upfront receipt assuming similar payment terms as 2022 auction.

Analysts of IIFL Capital Services believe neutral impact of the budget announcements on the telecom sector.