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UBS Investment Research
Idea Cellular
Pure play on India mobile sector
Event – India mobile sector is going through paradigm shift
We believe India mobile sector is going through paradigm shift with leading
players increasing tariffs as the current pricing is not sustainable. We believe that
improving pricing environment and regulatory outlook will lead to rerating of the
sector. We expect Idea to benefit the most given it’s a pure play on the sector.
Impact – Idea to benefit given high operating leverage
Idea continues to outperform its peers both in terms of revenue and earnings
growth. We expect the outperformance to continue given high operating leverage
in the company. We think Idea could also be an M&A candidate as and when
consolidation plays out in the sector. Also, we think court ruling on Idea Spice
merger is not a big issue as we believe most likely outcome of the situation is that
Idea may have to pay fine to DoT.
Action – Raise our price target to Rs125 (vs. Rs100 earlier)
Our EBITDA estimates for FY12E/13E/14E have increased by 9%/13%/16% as
we factor in higher realizations. Our EPS estimates for FY12E/13E/14E have
increased by 17%/19%/23% respectively. Also, in our SoTP valuations we are now
using uniform license fees of 8.5% (vs. 6% earlier) to incorporate savings from
license fee reduction.
Valuation: Maintain Buy with a SoTP based PT of Rs125
We value Idea at Rs128, its share in Indus at Rs20 and also incorporate a charge of
Rs24 towards one time spectrum fees, spectrum renewal fees and savings from
uniform license fees. We have used a WACC of 11.0% in our DCF to value Idea.
Idea Cellular Investment Case
The India mobile sector is going through paradigm shift with leading players
increasing tariffs as the current pricing is not sustainable. Improving pricing
environment and regulatory outlook should lead to rerating of the sector. Idea
should benefit given it’s a pure play. Idea outperforms its peers both in terms of
revenue and earnings growth; outperformance should continue given high
operating leverage in the company. Management has demonstrated their ability
to run an efficient mobile business harnessing their 900 Mhz 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
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Idea Cellular
Pure play on India mobile sector
Event – India mobile sector is going through paradigm shift
We believe India mobile sector is going through paradigm shift with leading
players increasing tariffs as the current pricing is not sustainable. We believe that
improving pricing environment and regulatory outlook will lead to rerating of the
sector. We expect Idea to benefit the most given it’s a pure play on the sector.
Impact – Idea to benefit given high operating leverage
Idea continues to outperform its peers both in terms of revenue and earnings
growth. We expect the outperformance to continue given high operating leverage
in the company. We think Idea could also be an M&A candidate as and when
consolidation plays out in the sector. Also, we think court ruling on Idea Spice
merger is not a big issue as we believe most likely outcome of the situation is that
Idea may have to pay fine to DoT.
Action – Raise our price target to Rs125 (vs. Rs100 earlier)
Our EBITDA estimates for FY12E/13E/14E have increased by 9%/13%/16% as
we factor in higher realizations. Our EPS estimates for FY12E/13E/14E have
increased by 17%/19%/23% respectively. Also, in our SoTP valuations we are now
using uniform license fees of 8.5% (vs. 6% earlier) to incorporate savings from
license fee reduction.
Valuation: Maintain Buy with a SoTP based PT of Rs125
We value Idea at Rs128, its share in Indus at Rs20 and also incorporate a charge of
Rs24 towards one time spectrum fees, spectrum renewal fees and savings from
uniform license fees. We have used a WACC of 11.0% in our DCF to value Idea.
Idea Cellular Investment Case
The India mobile sector is going through paradigm shift with leading players
increasing tariffs as the current pricing is not sustainable. Improving pricing
environment and regulatory outlook should lead to rerating of the sector. Idea
should benefit given it’s a pure play. Idea outperforms its peers both in terms of
revenue and earnings growth; outperformance should continue given high
operating leverage in the company. Management has demonstrated their ability
to run an efficient mobile business harnessing their 900 Mhz 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
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