Telenors remissvar över PTS förslag till revidering av hybridmodellen för samtrafikkostnader inom mobilnät beräkning av kapitalkostnader (WACC)

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Donald Harrell
8 years ago
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1 PTS Thrbjörn Blmdahl (Endast via e-pst) Stckhlm Telenrs remissvar över PTS förslag till revidering av hybridmdellen för samtrafikkstnader inm mbilnät beräkning av kapitalkstnader (WACC) Telenr Sverige AB (TSAB) 1

se Stckhlm 2008-01-16 Telenrs remissvar över PTS förslag till

2 1 Intrductin With reference t PTS wrkshp n Nvember 30 th 2007 regarding revisin f the cst f capital used in the mbile hybrid mdel, Telenr Sweden AB (TSAB) wuld like t prvide cmments t the cst f capital used in the mdel. In this dcument we argue that the weighted average cst f capital (WACC) currently used in the LRIC mdel is t lw and thus shuld be increased in the revised LRIC mdel. This will stimulate investments in mbile netwrks, further innvatin in services and increased cmpetitin t the benefit f end users. In the fllwing sectins, we therefre prpse a set f changes bth t the principles underpinning the WACC calculatin and t the actual parameter values f the cst f capital used in the hybrid LRIC mdel t align the mdeled WACC with the WACC f a Swedish mbile peratr. The mbile WACC and the fixed WACC shuld bth be based n a divisinalised apprach where the WACC represents the relevant parts f a larger business. Beta fr the fixed WACC is based n the TeliaSnera Beta divisinalised int three parts (fixed, Western-Eurpean mbile and EurAsia), where the fixed part is cnsiderably lwer than the ther tw Betas. The relevant mbile Beta shuld cnsequently be based n the mbile Beta frm the fixed WACC calculatin. This Beta shuld then be adjusted upwards t reflect a smaller peratr than TeliaSnera in the Swedish market. An alternative apprach culd have been t use benchmarks fr Betas, nt specifically cnsidering the TeliaSnera Beta. Such an apprach wuld then have t be used in bth the fixed and the mbile WACC calculatin. Hwever, as the fixed Beta is derived frm TeliaSnera s Beta calculatin als the Mbile Beta shuld use the same principle, i.e. als using a divisinalised calculatin. A mix f appraches wuld be incnsistent and nt in line with frward lking lng term, neutral ambitin f the LRIC mdeling principles utlined in the fixed mdel (mdel reference paper) and mbile mdel (cnceptual design) dcuments. 2

This will stimulate investments in mbile netwrks, further innvatin in services and increased cmpetitin t the benefit f end users.

3 2 Suggested changes t the principles fr calculating the cst f capital TSAB fully supprts the main principles used fr calculating the LRIC cst f capital based n CAPM. T further align the WACC calculatins with leading edge ecnmic thery, TSAB has the fllwing three cmments and clarificatins: I) The calculatins shuld be based n the same apprach and, where applicable, the same parameters as the fixed WACC. As described in chapter tw, the same divisinalised apprach shuld be used in the fixed and the mbile WACC calculatins. Given that the fixed WACC has been decided this implies the fllwing changes t the mbile WACC calculatins: 1. Swedish risk premium is cnsidered in the fixed WACC and shuld als be cnsidered in the mbile WACC. TeliaSnera estimated Beta f 1,09 is 78% higher than its regressin fit (accrding t Cpenhagen Ecnmics). This increases the divisinalised Beta fr the fixed WACC and shuld als d s fr the mbile WACC. 2. The Mbile Beta shuld be adjusted upwards t reflect a smaller peratr in the Swedish market than TeliaSnera. It wuld be unlikely that a smaller peratr shuld have a lwer Beta than the incumbent n the mbile market. Cnsequently the Beta shuld be adjusted upwards. Calculated unlevered mbile Beta shuld thus be higher than We prpse runding upwards t Parameters in the mbile WACC shuld where pssible be identical t the fixed WACC. We believe the fllwing parameters shuld be identical, i.e. use the same measuring technique and the same measuring perid: Crprate tax (T), 28% OK Risk free rate (Rf), 4,19% Ensure that the same measuring perid is used fr mbile WACC and Fixed WACC. Risk free rate in the Fixed WACC is 4,19%. The same risk free rate shuld be used in the mbile WACC. Currently the rate in the mbile WACC is 4,31%. Equity Risk Premium (ERP), 4,75% OK Estimated Beta befre divisinalising, 1,09 OK PTS decided a fixed Beta f 0,60 Mbile Beta calculatin shuld use this value, nt 0,61 as is currently nted. 3

the same parameters as the fixed WACC. As described in chapter tw, the same divisinalised apprach shuld be used in the fixed and the mbile WACC calculatins.

4 Shares in divisinalised Beta calculatin Fixed share 42% - OK EurAsia share 15% - Ensure that the same methd fr divisinalising is used as in the fixed Beta calculatin. Currently this share is 0% Mbile share 43% - Ensure that the same methd fr divisinalising is used as in the fixed Beta calculatin. Currently this share is 58%. II) The calculatins shuld nrmally be undertaken in cnjunctin with the mre thrugh reviews f the LRIC pricing methdlgy, except when there has been a significant change t any f the parameters, in which case it shuld be dne in the annual update. Regardless f when updates ccur, if ne r mre element(s) f the cst f capital calculatins is updated, all ther elements must als be updated. The calculatins shuld be updated as required, at least when the LRIC mdel is revised (every year). Given the interdependence with the fixed WACC, bth WACC calculatins need t be updated at the same time. It is imprtant t ensure a stable and predictable framewrk fr all peratrs. Incnsistent updates wuld risk the stability and predictability f the mdel. Therefre, it is imprtant that when a revisin f the cst f capital is cnducted, it is dne fr all elements in the calculatin. III) Target gearing (G) shuld be reduced t 15-25% The prpsed target gearing f 25-35% is cnsiderably higher than the median gearing f 18% in the regulatry benchmark. Cnsidering als that TeliaSnera gearing is at 15% and Telenr gearing at 25% it is mre likely that a relevant target gearing fr a new entrant in the Swedish market wuld be lwer than the prpsed gearing. A mre relevant interval wuld be 15-25%. 4

II) The calculatins shuld nrmally be undertaken in cnjunctin with the mre thrugh reviews f the LRIC pricing methdlgy, except when there has been a significant change t any f the parameters, in which

5 3 Ttal effect f changes t the parameter values used in the calculatin f the cst f capital TSAB Cpenhagen Decided Fixed Prpsal Ecnmics WACC* Risk free rate: 4.19% 4.31% 4.19% Equity risk premium: 4.75% 4.75% 4.75% Unlevered TeliaSnera Beta: 1,09 1,09 1,09 Unlevered Mbile Beta Levered Mbile Beta <1.88, 1.99> <1.36, 1.53> <1.71, 1.88>** Gearing: <15%, 25%> <25%, 35%> <15%, 25%>** Mbile share f value 43% 58% 43% Debt premium (%): <1, 2> <1, 2> <1, 2>*** Tax rate: 28% 28% 28% Implied cst f capital: 15,8% 12,6% 15.2% *) Use decided Fixed WACC fr calculatin f a Mbile WACC **) Based n mbile gearing frm current TSAB prpsal ***) Based n debt premium frm current TSAB prpsal We are, f curse, available t PTS t further discuss the questins raised herein including prviding detailed data used in the cmputatins. Telenr Sverige AB Fredrik Helgessn Manager Strategy and Regulatry Telenr Netwrks fredrik.helgessn@bredband.cm Ph.: +46 (0)

88>** Gearing: <15%, 25%> <25%, 35%> <15%, 25%>** Mbile share f value 43% 58% 43% Debt premium (%): <1, 2> <1, 2> <1, 2>*** Tax rate: 28% 28% 28% Implied cst f capital: 15,8% 12,6% 15.

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