Indian government officials could meet this week to consider lowering the license fees for telcos from 8% to 5-6%, as per a media article on Economic Times today.
If such a decision were taken, it would have to be ratified by the Cabinet. The article also mentioned that the three telcos could save a combined Rs40-50bn annually if this were to flow through. The report has not been confirmed.
With Universal Service Obligation (USO) comprising 5% of the total 8% license fee and a large USO corpus (US$7.2bn as of March 2019) already available with the government, telcos have been asking for a reduction in license fees. Moreover, with telcos announcing tariff hikes and TRAI considering floor tariffs, any potential increase in telecom revenue could partially offset any reduction in license fee revenue for the government.
For Airtel, we assume a license fee of 5% in our bull case, which benefits Indian wireless margins. It makes up Rs31/share in our bull case.
Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.
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