However, the estimated savings depend on the operators buying large amounts of 5G airwaves during next month’s auction.
estimates that the applicable SUC rates for Airtel, Vi and Jio would drop to “0.4%, 0.4% and 0.3% of adjusted gross revenue (AGR) respectively) if they bought as many as 500 units of 26 GHz and buy 100 units of 3.3-3.67 GHz spectrum in July sales”.
Currently, Airtel, Jio and Vi SUC payouts are 3.2%, 3.1% and 2.9% of AGR respectively. If the National Long Distance Revenue (NLD) is included in the AGRs of telcos, the current SUC level rises to 3.6 to 4.1% of the AGR range.
But as spectrum acquired in future auctions will not attract SUC, if telcos buy large amounts of 5G airwaves during the July sale, their aggregate payouts of these regulatory fees will plummet to well below 1% of AGR with the removal of the 3% floor rate.
ICICI Securities expects Airtel, Jio and Vi’s effective annual payouts for 5G spectrum to drop to about a modest Rs 1,200 crore, Rs 1,100 crore and Rs 2,400 crore, after factoring in the annual savings on the SUC front, after removal of the 3% floor.
The government plans to start selling 72GHz of 5G airwaves ranging from 600MHz to 26GHz with a value of Rs4.3 lakh crore from July 26 at a base price. Market leader Reliance Jio and
expected to be the main bidders, with the tight Vodafone Idea to a lesser extent. The government has priced the 3.3-3.6 GHz airwaves at Rs 317 crore per unit and Rs 7 crore per unit for 26 GHz airwaves. also expect greater demand, especially for the low-cost 26 GHz spectrum, as it can help operators greatly reduce their SUC outflow without any meaningful investment.
“We expect all three operators to benefit from DoT’s order on SUC computation and see them acquire a combination of 3.3GHz and 26GHz spectrum at a minimum price to deploy 5G services, given the additional benefits of lowering SUC and boosting Ebitda (read: operating profit),” BNP Paribas said in a note.
The European brokerage estimates that if Airtel’s SUC falls to as much as 1% of AGR from current levels, it could boost telco’s FY24 India Mobile Ebitda by 4.1%. The potential growth estimates of mobile EBITDA for Jio and Vi were not immediately available.
Analysts nevertheless expect general bids to remain subdued as minimum prices are higher than what telcos would have liked and also because spectrum offerings are adequate, along with the prospect of annual auctions. They have also ruled out excessive bids as there are only two serious bidders – Jio and Airtel – as Vi’s financial battle continues as it has yet to complete its long-running Rs 10,000 crore external fund raising campaign.