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Idea Cellular Ltd.
News Reports on Cancellation of Licenses Not a Concern
Quick Comment – What's new: The Economic Times
today reported that the Dept of Telecommunications
(DOT) has issued notice to Idea Cellular (Idea) for not
meeting rolling out obligations in Punjab circle. Punjab
and Karnataka were operational circles for Spice
Communications (Spice), which Idea acquired in 2008.
Idea prior to the acquisition had received the license for
these two circles which it did not use eventually as it took
over Spice’s existing operations.
Impact on our views: We reiterate our Overweight
rating on Idea and are not be concerned about this news
since the government approved the merger. Also since
Spice had ongoing services since 2000, the merged
entity will likely meet the roll-out obligations. Idea
management in their F1Q11 earnings call had
commented that they have had 16-17 letters to the
government since the policy of M&A was unclear and
that Idea has not used these overlapping licenses.
While the government could cancel the overlapping
licenses, Idea may not be able to recover the entry fee
paid. From a sector perspective, canceling the
overlapping licenses would be positive since the
spectrum in these circles could be given back to the
government for re-allotment since Spice received 4.4
MHz in 3 out of the 4 circles (other than Punjab and
Karnataka) and Idea (pre-merger) also received 4.4
MHz in Punjab and Karnataka (Exhibit 1).
Background: Idea acquired Spice, which had permits to
operate in six regions viz. Punjab, Karnataka, Andhra
Pradesh, Delhi, Haryana and Maharashtra, but offered
services only in Punjab and Karnataka. Idea merged
these two with itself as it did not have mobile services in
these circles, but did not use Spice’s licenses in the
other four regions where it was already present. Also
Idea did not use its own licenses and airwaves allotted
for Punjab and Karnataka because it had
integrated Spice’s mobile operations in these regions with itself.
The company had applied for these permits prior to its deal with
Spice.
Company Description
Idea Cellular Ltd is part of the Aditya Birla Group. It provides
pan-India wireless telecom services and has a national
long-distance license. The company is the sixth-largest wireless
operator in India. It had over 84mn subscribers as of Jan 2011.
India Telecommunications
Industry View: Attractive
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Idea Cellular Ltd.
News Reports on Cancellation of Licenses Not a Concern
Quick Comment – What's new: The Economic Times
today reported that the Dept of Telecommunications
(DOT) has issued notice to Idea Cellular (Idea) for not
meeting rolling out obligations in Punjab circle. Punjab
and Karnataka were operational circles for Spice
Communications (Spice), which Idea acquired in 2008.
Idea prior to the acquisition had received the license for
these two circles which it did not use eventually as it took
over Spice’s existing operations.
Impact on our views: We reiterate our Overweight
rating on Idea and are not be concerned about this news
since the government approved the merger. Also since
Spice had ongoing services since 2000, the merged
entity will likely meet the roll-out obligations. Idea
management in their F1Q11 earnings call had
commented that they have had 16-17 letters to the
government since the policy of M&A was unclear and
that Idea has not used these overlapping licenses.
While the government could cancel the overlapping
licenses, Idea may not be able to recover the entry fee
paid. From a sector perspective, canceling the
overlapping licenses would be positive since the
spectrum in these circles could be given back to the
government for re-allotment since Spice received 4.4
MHz in 3 out of the 4 circles (other than Punjab and
Karnataka) and Idea (pre-merger) also received 4.4
MHz in Punjab and Karnataka (Exhibit 1).
Background: Idea acquired Spice, which had permits to
operate in six regions viz. Punjab, Karnataka, Andhra
Pradesh, Delhi, Haryana and Maharashtra, but offered
services only in Punjab and Karnataka. Idea merged
these two with itself as it did not have mobile services in
these circles, but did not use Spice’s licenses in the
other four regions where it was already present. Also
Idea did not use its own licenses and airwaves allotted
for Punjab and Karnataka because it had
integrated Spice’s mobile operations in these regions with itself.
The company had applied for these permits prior to its deal with
Spice.
Company Description
Idea Cellular Ltd is part of the Aditya Birla Group. It provides
pan-India wireless telecom services and has a national
long-distance license. The company is the sixth-largest wireless
operator in India. It had over 84mn subscribers as of Jan 2011.
India Telecommunications
Industry View: Attractive
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