Govt set to raise Rs50,000 cr in spectrum sale: Credit Suisse

Brokerage firm Credit Suisse estimates the government's revenue from the next spectrum auction, proposed to be held in 2016-17, to be around Rs50,000 crore based on Budget provisions for communication services, say reports.

Union Budget 2016-17 has more than doubled receipt provision from communication services to Rs98,994.93 crore. This is about 75 per cent compared with the amount it actually received in current fiscal from the telecom ministry.

Reports quoting a Credit Suisse report by Research Analysts Sunil Tirumalai and Chunky Shah say the estimate of the total provision included about Rs22,000 crore from recurring licence and spectrum fees revenues, Rs6,500 crore from deferred payments of past auctions and Rs20,000 crore from one-time spectrum fees.

"...balance about Rs500 billion likely from upcoming spectrum auctions," the report said.

However, the report says that if the government achieves its target, "it would be a significant negative for the sector as we believe spectrum outflow in consensus is negligible."

Based on the Budget announcement, the report estimates that the government is likely budgeting a Rs1,62,500 crore ($25 billion) spectrum sale from the auctions. Out of which 25-30 per cent of would get paid immediately and form part of revenue receipts for the year.

"This implies about 30 per cent 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 per cent Krishi Kalyan Cess 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 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, the report said.

"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," it added.