DBS Telecommunication Rebalancing Levies

Telecommunication Rebalancing levies

Bloomberg reported that the President cut telco services levy to 0.5% of annual sales from 1% previously. The Government had also set Universal Service Obligation fees at 1.25% of sales after deducting uncollectible receivables and interconnection charges, up from 0.75% previously.
This move effectively channels more funds towards the development of telecommunication for the rural areas. While the reduction of 0.5% services levy could raise PT Telkom’s (TLKM IJ) FY09 earnings by <3% and PT Indosat’s (ISAT IJ) by
<5%, the 0.5ppt increase in USO services could mitigate bulk of the benefit from the lower services levy. As the impact is minimal.
We retain our Neutral stand on the telecommunication sector.