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Idea Cellular
Takeaways from Axiata investor day
Event
Our Malaysia and Singapore telecom analyst, Prem Jearajasingam, attended
the Axiata Investor Day in Kuala Lumpur on Monday. Axiata Group owns
19.98% of Idea. We spoke to Prem after his visit and present key takeaways.
Impact
Axiata management – happy with India operations. Axiata management
visited India recently and came back pleased. Management said it could see a
‘change in sentiment’ and was happy with the company’s operations.
Axiata – no plan to exit India: On questions being asked about any plans to
exit India, Axiata’s management said it is not planning anything of the kind for
at least 5–7 years. On the contrary, Axiata’s management may increase its
stake in Idea. We find it worth noting, however, that as per the current
agreement between the Birlas and Axiata, the latter’s stake in Idea cannot
exceed 20.11%. This implies that Axiata cannot increase its stake in Idea by
more than 0.13%.
Axiata's M&A plans: Axiata does not envisage any big push in this area
(except for consolidation in Cambodia). In India, it does not anticipate any
consolidation for at least two years. However, it is asking what we think is the
key (open-ended) question: “What would extra capital at Idea do to its future
prospects, especially as conditions in India improve?”
India a strategic destination for Axiata. India is an important market for
Axiata. Depending on opportunities, management is keen to make further
investments. Our view (on Idea) has been that Indian promoters will not sell
out. On the contrary, we expect them to take the lead in consolidation when
the opportunity arises after the new telecom policy. We believe Axiata could
support Idea in organic and inorganic growth to increase its ‘skin in the game’
in India.
Earnings and target price revision
No change.
Price catalyst
12-month price target: Rs66.00 based on a Sum of Parts methodology.
Catalyst: News on operating metrics (ARPM/ tariffs/ 3G), new telecom policy.
Action and recommendation
Maintain Underperform: We reiterate that Idea is a pure play in the sector
with a strong business model and operations. Tariff increases in the industry
are also encouraging. At some stage, we believe Idea may be an interesting
play on the sector. However, Idea continues to trade at a premium to industry
peers (notably Bharti), driven, we believe, by expectations that it is an
acquisition target. We maintain our (contrarian) view that Idea will instead
emerge as a buyer (of spectrum/operators) when regulations turn supportive.
We wait for clarity on telecom policy and the valuation premium to shrink
before we would reconsider our position.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Idea Cellular
Takeaways from Axiata investor day
Event
Our Malaysia and Singapore telecom analyst, Prem Jearajasingam, attended
the Axiata Investor Day in Kuala Lumpur on Monday. Axiata Group owns
19.98% of Idea. We spoke to Prem after his visit and present key takeaways.
Impact
Axiata management – happy with India operations. Axiata management
visited India recently and came back pleased. Management said it could see a
‘change in sentiment’ and was happy with the company’s operations.
Axiata – no plan to exit India: On questions being asked about any plans to
exit India, Axiata’s management said it is not planning anything of the kind for
at least 5–7 years. On the contrary, Axiata’s management may increase its
stake in Idea. We find it worth noting, however, that as per the current
agreement between the Birlas and Axiata, the latter’s stake in Idea cannot
exceed 20.11%. This implies that Axiata cannot increase its stake in Idea by
more than 0.13%.
Axiata's M&A plans: Axiata does not envisage any big push in this area
(except for consolidation in Cambodia). In India, it does not anticipate any
consolidation for at least two years. However, it is asking what we think is the
key (open-ended) question: “What would extra capital at Idea do to its future
prospects, especially as conditions in India improve?”
India a strategic destination for Axiata. India is an important market for
Axiata. Depending on opportunities, management is keen to make further
investments. Our view (on Idea) has been that Indian promoters will not sell
out. On the contrary, we expect them to take the lead in consolidation when
the opportunity arises after the new telecom policy. We believe Axiata could
support Idea in organic and inorganic growth to increase its ‘skin in the game’
in India.
Earnings and target price revision
No change.
Price catalyst
12-month price target: Rs66.00 based on a Sum of Parts methodology.
Catalyst: News on operating metrics (ARPM/ tariffs/ 3G), new telecom policy.
Action and recommendation
Maintain Underperform: We reiterate that Idea is a pure play in the sector
with a strong business model and operations. Tariff increases in the industry
are also encouraging. At some stage, we believe Idea may be an interesting
play on the sector. However, Idea continues to trade at a premium to industry
peers (notably Bharti), driven, we believe, by expectations that it is an
acquisition target. We maintain our (contrarian) view that Idea will instead
emerge as a buyer (of spectrum/operators) when regulations turn supportive.
We wait for clarity on telecom policy and the valuation premium to shrink
before we would reconsider our position.
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