The Finance Minister, as part of the Union budget 2009-10, announced an increase in MAT to ~16.8% (incl. surcharge/cess) from 11.2% though extending time line for using MAT credit to 10 years (7 years).

This will Result in higher cash outflow, it will be EPS neutral given: both Idea and RCOM will likely claim higher corresponding MAT credit; and in case of Bharti Airtel, our FY10 effective tax rate assumption currently stands at 16%.

The budget estimates includes Rs350bn as expected revenue from auction of 3G spectrum. This estimate likely assumes: 1) a higher reserve price (Rs40bn for pan-India spectrum as per media reports); and 2) more number of available slots for auction (~5 earlier). We however believe that this figure is optimistic given the likely reduced intensity in 3G bidding if higher number of slots does become available.