MOSL: TELECOM-Next phase of growth-Shift from feature to smartphone-Capex shifting towards backhaul

​TELECOM: Next phase of growth: Shift from feature to smartphone; Capex shifting towards backhaul; competition shifting towards quality

We hosted an ex senior official of TRAI. Our key takeaways:

• DOT approval is the only hurdle left for the Idea-Vodafone merger. TRAI's recent recommendation to relax the spectrum cap should help in approval without surrendering spectrum. The final word from DOT is likely by March 2018.
  
• Over the next 2-3 quarters, the industry should stabilize and churn should come down.
  
• ARPU has bottomed out for the industry and should increase, largely driven by data.
  
• The next 2-3 quarters are crucial - about 100m subscribers from RCom, Aircel and Tata Tele would be grabbed by major players, particularly Bharti.
  
• 2G technology is likely to be in existence for 5-6 years more, as 500m+ subscribers are still on feature phone.
  
• The IUC sunset clause could be reviewed again in 2020 if majority of 2G subscribers do not shift to 4G, as the cost of interconnect is significantly high on 2G compared to 4G.
  
• TRAI would lay papers for recommendation for the next spectrum auction in the next 2-3 months, but don't expect auctions to happen before 1QFY19.
  
• Unsold spectrum of 700MHz, and new spectrum of 1,400 and 3,300/3,400MHz are likely to be auctioned with lower reserve price given the sufficient spectrum and opportunity to acquire from the small distressed players.