3G auction ends: How will it impact telcos EPS?

As the auction concluded on Wednesday, the successful bidders would be allowed to offer 3G services on a commercial basis from Sep 1.

The 3G spectrum auction finally ended yesterday after 34 days of hectic bidding. The government netted in USD 14.6 billion from the 3G auctions which will give it elbow room to deal with the rising deficit. The all-India 3G licence is worth USD 3.6 billion.

Commenting on the same, Sanjay Chawla of Anand Rathi Securities, a close telecom watcher, said he expected the pan India 3G license to cost USD 2 billion. "It is good that there is no pan India player."

Impact on telcos:
Bharti is likely to pay Rs 12,300 crore for 13 circles. While Reliance Communications and Idea will pay Rs 8,600 crore and Rs 5,769 crore for 13 circles each. (Read: Who gets what? & Who's the real winner?) He does not see any EBIDTA contribution from 3G for the next two years.

On Bharti:
He stated that Bharti's FY12 EPS could be impacted by 12-13%. "The total outgo for Bharti is lower than the earlier estimate. The worst case net debt to EBIDTA for Bharti would be 2.5 times. Hence, we have no real worries over Bharti's balance sheet." Bharti not going for a pan India licence is positive for stock, he added. (Also see: 3G auction ends: Bharti cries foul)

On Idea:
Idea's FY12 EPS impact could be 40-50% on account of 3G, Chawla said. Post auction, he feels Idea deserves a premium over Bharti, Reliance Communications. "On an enterprise value to EBIDTA basis, Idea is trading at a discount to R-Comm."

On BSNL/MTNL:
State-run telecom players like BSNL and MTNL have to pay the price determined in the 3G auction for the licences that were allotted earlier. This has led to questions on whether they can afford to pay such huge sums and whether there will be a waiver. To this, Chawla said he expects a special discount/waiver for BSNL, MTNL.