One-time spectrum fee will be prospective: Nirmal Bang

The the major fundamental issues continue to dog the sector 

Harit Shah

IT analyst

Nirmal Bang Institutional Equities

Harit Shah, senior research analyst, Nirmal Bang Institutional Equities, explains to CNBC-TV18 that the final one-time spectrum fee that will be eventually charged will be slightly higher than what was initially calculated and the charges will be prospective.

The analyst adds that Bharti and Idea will be the most affected as both own spectrum of 4.4 Mhz and above, across a number of circles.  Shah concludes that the EGoM's announcements do not change his negative view of the telecom sector which, he says, is still not rid of some of the problems fundamental to the functioning of telcos.

Below is an edited transcript of the analysis on CNBC-TV18.

Q: What is your opinion on the EGoM conclusion that the charges will be on a prospective as opposed to retrospective basis?

A: We did not expect the charges to be retrospective. According to sources, it in excess of 4.4 Mhz as opposed to over-6.2 Mhz which is what we initially calculated. The final one-time spectrum fee that will be eventually charged will be slightly higher than what we had initially calculated.

It is important to note that the exact date from when the fee will be levied has not yet been finalised.

Q: Which telcos, according to you, will be affected the least and the most?

A: It will be fair to say that Bharti and Idea will be impacted more as they hold a spectrum above 4.4 Mhz in a number of circles- Idea holds a spectrum above 4.4 Mhz in seven circles and Bharti holds 4.4 Mhz in 12 or 14 circles. RComm does not hold excess excess spectrum and more than one or two circles so they will be least impacted amongst the listed telecoms.

Q: Any particular call on these stocks at this point in time and would this information change your view on any of these stocks. Is it a relief rally that you are seeing?

A: I don't think there is any rationale for the stocks to rally to the extent that we have seen just now. We have been negative on the sector since the beginning of the year, so that view does not really change. I think that stocks maybe rallying because at least some clarity has come about on one particular regulatory issue.

But the major fundamental issues continue to dog the sector in terms of hyper competition, limited ability to raise prices and also the potential spectrum refarming that may take place going forward. The negative still remains and there is no reason at this point to change our view on the sector just yet.