Telecom Sector Update – SUC Reform To Reduce Spectrum Pay-Out Burden: ICICI Securities

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Modification in spectrum usage charge, issued by the Department of Telecom, will significantly reduce spectrum pay-out burden for operators from the upcoming 5G spectrum auction, and also restrict return on invested capital compression.

As per our calculation, access SUC rate (% of adjusted gross revenue) as on Q4 FY22 for Bharti Airtel Ltd./ Vodafone Idea Ltd. / Reliance Jio was 3.2% / 2.9% / 3.1%, respectively (adjusted for SUC on microwave spectrum, which is not a part of the modification issued).

This is expected to dip to 0.4%/ 0.3%/0.4% for Airtel/Vodafone/RJio if each operator buys 100 megaHertz pan-India in 3300 MHz band, and 500 MHz pan-India in 26 GHz band.

The total spectrum payout at reserve price is Rs 352 billion, and annual instalment is Rs 33.7 billion. However, SUC rate cut will save Rs 21 billion for Airtel, Rs 10 billion for Vodafone Idea and Rs 23 billion for RJio on Q4 FY22 annualised AGR.

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