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Idea Cellular Ltd.
Conference takeaways
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways....
Competitive environment seems stable
Idea indicated that traffic growth remains healthy and competition has stabilized.
The company does not see mobile number portability as a game-changer.
Potential rollout of BWA operations by Reliance Industries was a concern brought
up by many investors.
3G uptake still early to predict
Idea aims to launch 3G in its licensed circles by April 2011. The company says it
is still early to predict demand for 3G services and 3G capacity utilization.
However, capacity creation on 3G is unlikely to hurt voice tariffs as these are
already very low.
Active industry consolidation via M&A seems unlikely
Idea does not expect active M&A-led industry consolidation in the near term. M&A
attractiveness of smaller operators seems low from the standpoint of subscribers,
electronics and spectrum.
Idea's net debt unlikely to rise further
Regarding its balance-sheet health, Idea said that net debt is unlikely to rise as its
operating cashflows and capex needs are well matched. Also, the company holds
attractive assets in the form of its own tower portfolio and its stake in Indus
Towers.
Price objective basis & risk
Idea Cellular (IDEAF)
Our PO of Rs65/sh for Idea is based on DCF. Our PO implies a valuation of 7.5x
FY12E-EV/EBITDA, i.e., a 35% premium vs. GEM wireless majors to allow for
stronger long-term growth potential if 3G ramps up. Sooner-than-expected
industry consolidation and stronger-than-anticipated Indus profitability could
present upside to our PO. Significantly higher competitive intensity in the industry
and dramatic regulatory changes pose downside risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Idea Cellular Ltd.
Conference takeaways
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways....
Competitive environment seems stable
Idea indicated that traffic growth remains healthy and competition has stabilized.
The company does not see mobile number portability as a game-changer.
Potential rollout of BWA operations by Reliance Industries was a concern brought
up by many investors.
3G uptake still early to predict
Idea aims to launch 3G in its licensed circles by April 2011. The company says it
is still early to predict demand for 3G services and 3G capacity utilization.
However, capacity creation on 3G is unlikely to hurt voice tariffs as these are
already very low.
Active industry consolidation via M&A seems unlikely
Idea does not expect active M&A-led industry consolidation in the near term. M&A
attractiveness of smaller operators seems low from the standpoint of subscribers,
electronics and spectrum.
Idea's net debt unlikely to rise further
Regarding its balance-sheet health, Idea said that net debt is unlikely to rise as its
operating cashflows and capex needs are well matched. Also, the company holds
attractive assets in the form of its own tower portfolio and its stake in Indus
Towers.
Price objective basis & risk
Idea Cellular (IDEAF)
Our PO of Rs65/sh for Idea is based on DCF. Our PO implies a valuation of 7.5x
FY12E-EV/EBITDA, i.e., a 35% premium vs. GEM wireless majors to allow for
stronger long-term growth potential if 3G ramps up. Sooner-than-expected
industry consolidation and stronger-than-anticipated Indus profitability could
present upside to our PO. Significantly higher competitive intensity in the industry
and dramatic regulatory changes pose downside risks.
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