Corporate tax cut would bring no key benefits for telecom sector, says I-Sec report

As per a report by broking firm I-Sec, the reduction of corporate tax rate from 35 per cent to 25 per cent will bring no key benefits to telecom companies given their continued losses.

As per the report, the tax cut means that Bharti Airtel may see small benefits on a cashflow basis, while, Vodafone Idea (VIL) will see no near-term benefit. On the contrary, Airtel and VIL’s reported losses will increase due to lower deferred tax though it will have no impact on cashflow, the report said.

However, according to I-Sec, the revised tax rates would benefit Bharti Telemedia, Bharti Infratel, Indus Towers and Tata Communications. Applying the new effective tax rate (ETR) would lead to an increase in Bharti Infratel’s net profit for the year by 16.7 per cent, making it the biggest beneficiary. Further, the firm believes that Tata Communications would also witness some benefit as applying the new ETR to fiscal year 2019, leads to an increase in its net profit by Rs 1.4 billion, I-Sec said.