Idea Cellular (3G – Opportunity and Challenge, REDUCE): IIFL

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Idea Cellular (3G – Opportunity and Challenge, REDUCE): 

In our recent meeting with the management of Idea Cellular’s management, we sensed that hopes are pinned on a regulatory turnaround and revenue from 3G. That said, the beginning will be a bit jerky, as the company will include full interest and spectrum cost from 4Q (run rate ~Rs3bn per quarter). On the regulatory front, we believe that eventually the government will impose some penalties on all companies, but Idea Cellular may face proportionately greater pain, on account of its smaller market cap (than Bharti), and having got 4.4MHz of start-up GSM spectrum in nine circles and not just top ups. We retain REDUCE with TP Rs62.