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Idea Cellular
Investment case: Idea is one of our top picks in the telecom sector as: 1) we
expect the company to benefit the most from the improving pricing environment
and regulatory outlook since it is a pure play on the Indian mobile sector; 2) the
company continues to outperform its peers in terms of revenue and earnings
growth and we expect the outperformance to continue given its high operating
leverage; and 3) Idea management has demonstrated its ability to run an efficient
mobile business harnessing its spectrum advantage. Given its strong 900 Mhz
footprint, we think Idea could also be an M&A candidate as and when
consolidation plays out in the sector.
Valuation: Our price target is SOTP based. We value Idea at Rs123 and its
share in Indus at Rs20, we also incorporate a charge of Rs23 towards one time
spectrum fees, spectrum renewal fees and savings from uniform licence fees.
We use a WACC of 11.0% in our DCF to value Idea.
2012 Catalysts: 1) The NTP 2011 is likely to be announced in 2012; 2) BWA
companies are likely to launch data services during H112; and 3) greater clarity
on issues pertaining to 2G spectrum pricing and allocation.
read details and other companies in list (click link below)
UBS India – Outlook 2012 ::Most & Least Preferred Stock Ideas for 2012
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