Based on the provisions in the Budget, brokerage firm Credit Suisse has estimated that the government may get Rs 50,000 crore in next spectrum auction planned to be held in 2016-17. Union Budget 2016-17 has more than doubled receipt provision from communication services to Rs 98,994.93 crore. This is about 75 percent compared with the amount it actually received in current fiscal from the telecom ministry. Also Read - Ola to offer free oxygen concentrators to the needyAlso Read - 4G spectrum auction: Reliance Jio comes out as highest bidder, Airtel follows
A Credit Suisse report by Research Analysts Sunil Tirumalai and Chunky Shah estimate the total provision would include about Rs 22,000 crore from recurring licence and spectrum fees revenues, Rs 6,500 crore from deferred payments of past auctions and Rs 20,000 crore from one-time spectrum fees. “…balance about Rs 500 billion likely from upcoming spectrum auctions,” the report said. It further said if government achieves its target then ” it would be a significant negative for the sector – as we believe spectrum outflow in consensus ests is negligible.”
Based on the Budget announcement, the report estimates that the government is likely budgeting a Rs 16,2500 crore ($25 billion) spectrum sale from the auctions.. Out of which 25-30% of would get paid immediately and form part of revenue receipts for the year.
“This implies about 30 percent of value of spectrum on offer gets sold at TRAI reserve prices. Seen in another way, this assumes at least a partial success of 700 MHz spectrum, as the value in all other spectrum bands is less than $20 billion,” the report said.
Credit Suisse sees that half a percent Krishi Kalyan Cess would introduced by government in this budget would add to the woes of telecom operators who have struggled in the past while passing on such tax increases to subscribers. The report said that the service tax introduced on spectrum trading would have negligible impact on the sector as Service tax on spectrum transfer will have negligible impact as the companies can set-off this service tax against the regular service tax liability.
“Unless the operator who purchases the spectrum does not have any revenues (and hence no service tax payable to off-set), this change will not have an impact on the transaction,” the report said.