The move comes after ministers of the Federal Supreme Court (STF) formed a majority to reduce ICMS to Santa Catarina’s telecommunications services, a decision that could be extended to other states in the country.
At about 1:50 pm, shares of VIVT3 rose 4.5% on B3, trading at 51.85 Brazilian reais, while TIMS3 shares rose about 5%, at 13.46 Brazilian reais. At the day’s highs, shares were up 8.8% and 8.42%, respectively.
Voting for “Extraordinary Appeal 714139/SC” began on November 12 and ends next Monday (22). The proposal on the agenda predicts that the rate will be reduced “as of the next fiscal year,” which means that in Santa Catarina, the tax will be reduced for the next year.
On average, the percentage of ICMS paid by telecom companies in Brazil is 27.82%.
So far, six out of the 11 higher ministers have cast their votes – all in favor of the telecom sector; It takes, however, eight mod votes to beat.
In a brief comment, Credit Suisse writes that the impact could be significant, at about 10% of sales, but that potential adjustments or mandatory transfers to consumers could reduce the impact.
For BTG Pactual, the news is very positive for carriers. Analysts estimate that the decision could lower the tax rate by 7 to 10 percentage points, depending on the state.
“Assuming that the full ICMS reduction will flow into EBITDA for telecom companies, we estimate that the positive impact on Ebitda would be in the range of 12-20%,” analysts Carlos Sequeira and Osni Carf write in a report.
Although telecommunications companies are unable to sustain all the gains and are forced to pass on at least part of the ICMS reduction to consumers, analysts at BTG Pactual remain optimistic, given that the reduction “will translate into greater use of telecom services.”
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