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UBS Investment Research
Idea Cellular
Changing our Idea about Idea
„ We turn bullish on Idea
We are turning bullish on Idea as we believe Idea will emerge as one of the biggest
beneficiaries of better regulatory and pricing environment. Idea management has
demonstrated their ability to run an efficient mobile business harnessing their 900
Mhz spectrum advantage. Idea is a leveraged way to play Indian mobile sector
turnaround.
„ Idea is an attractive acquisition candidate, in our view
Though the Birla group has not expressed any interest in selling Idea, we believe
Idea is an attractive acquisition candidate given its strong 900 Mhz footprint. Idea
stock will continue to trade at a premium to the other listed India mobile players
due to its M&A potential.
„ Change in management is a non-event, in our view
Idea CEO Sanjeev Aga has recently decided to step down from his CEO position.
Himanshu Kapania, who is the COO will replace Sanjeev Aga. With over two
decades of industry experience, we believe Himanshu Kapania will be an able
successor to Mr. Aga.
With Bharti's acquisition of Zain, Investors who want pure play exposure to India
mobile growth are inclined to look at Idea Cellular. We believe Idea will benefit in
2011 from increased asset allocation towards the telecom sector on the back of
regulatory changes as well as improving competitive dynamics. We upgrade Idea
to Buy (from Sell) with a revised PT of Rs105 (vs. Rs75 earlier). Our price target
revision is based on a marginally lower WACC of 11.8% (from 12.0% earlier) and
an increase in our estimates. We increase our FY12E/13E EPS by 29% and 5% to
2.00/3.99.
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