Telecom: 1800MHz spectrum auction ends - 2G auction fails; Spectrum price could be lowered - BRICS

The much awaited 2G spectrum auction in 1800MHz band ended in just two days (total 14 clock rounds), with DoT managing to sell only 102 out of 176 available blocks and garnering merely Rs94bn, as against the targeted amount of Rs400bn.

Valuation: We believe the failure of 2G auction has resulted in current reserve price (Rs35bn per block pan-India) becoming a price ceiling for spectrum, rather than a price floor. Any lowering of 2G spectrum price will benefit Bharti and Idea, as the impact on their balance sheet will reduce, due to decline in future payoffs for license renewals, spectrum re-farming, and excess spectrum penalty. Bharti trades at 7x FY13 EV/EBITDA; maintain Add with a TP of Rs305. Idea trades at 6.6x FY13 EV/EBITDA, maintain Add with TP of Rs90.

Source : Equity Bulls

Keywords