For FY14, the government is looking to raise Rs 400 bn from the telco sector (both recurring revenue and one-off payments). As per the budget document, the one-off payments relate to receipts from auction of 1800, 900 MHz & 800 MHz and one-time spectrum charges as recommended by TRAI.
We estimate the targeted one-off amount in FY14 to be Rs 228 bn and expect the remaining Rs 180 bn to come from recurring revenues. In our view, the one-off amount could be raised if the government earns 1) onetime excess spectrum amount; and 2) successfully conducts 800 MHz auction at the set reserve price and sells all targeted 900/1800 MHz spectrum at a reserve price roughly 45% lower than the recently failed auction’s reserve price.
However, the 900 MHz refarming may not be conducted in FY14 due to prolong litigation. Even if 900 MHz, 1800 MHz and 800 MHz auctions are conducted in FY14, the government will only earn one third of the total raised money from the auction in this fiscal year as the remaining amount is likely to be deferred.