Please refer to important disclosures at the end of this report 1 EBITDA 1,473 1,423 3.6 1,345 9.6 EBITDA margin (%) 26.4 26.8 (36)bp 26.7 (32)bp Source: Compan y, Angel Research For 3QFY2013, Idea Cellular (Idea) reported mixed results with revenue coming in in-line with expectations while operating margin surprised negatively. The company’s total network minutes grew by 5.2% qoq, leading to a growth in network traffic to 132bn min. The average revenue per minute (ARPM) declined by 0.5% qoq to `0.41 due to decline in non-voice revenues’ share to 14.6% from 15.6% in 2QFY2013. The Management indicated that the company has not hiked headline tariff (as of now), but has only reduced promotional offers, that too in specific circles. For 3QFY2013, Idea reported a consolidated revenue of `5,579cr, up 5.0% qoq, on the back of a sharp qoq increase in minutes of usage (MOU) to 384min, up 7.0% qoq. The company’s EBITDA margin declined by36bp qoq to 26.4% primarily because of qoq increase in access costs (up 40bp), network costs (up 20bp) and subscriber acquisition, advertisement and promotion expenses (up 40bp). The PAT came in at `229cr, down 4.8% qoq, marred by a forex loss of `13.3cr as against a forex gain of `18.0cr in 2QFY2013. During 3QFY2013, Idea won back 1,800MHz spectrum in all its seven circles in the 2G auction conducted by the government in November 2012, for which licenses had been quashed by the Supreme Court. Post the 2G auction, only four operators have pan-India presence. Idea’s Management indicated that the company has not hiked headline tariff (as of now) and has only reduced promotional offers, that too in specific circles. However, it reiterated its stance that tariff hikes are becoming imminent. Going forward, we expect ARPMs to improve as Idea has hiked tariffs via reduction of promotional offers. This should offset the rising input and regulatory costs. With increase in tariff rates expected going ahead, we have factored in a revenue CAGR of 10.7% over FY2012-14E. Idea still remains surrounded by regulatory uncertainties in the sector such as one-time spectrum fee and spectrum refarming. With the 2G auctions coming up in March 2013, we expect partial resolution of these uncertainties, and the same would be a positive for the sector as a whole. Key financials (Consolidated, Indian GAAP)% chg 22.9 24.6 26.0 13.0 8.3 % chg 8.3 (9.4) (16.3) 33.4 33.5 EBITDA margin (%) 27.4 24.5 26.1 26.6 27.7 P/E (x) 39.0 41.4 51.5 38.6 28.9 P/BV (x) 3.1 3.0 2.9 2.7 2.4 RoE (%) 8.0 7.0 5.5 6.9 8.4 RoCE (%) 7.0 5.5 7.8 8.6 10.3 EV/Sales (x) 3.6 3.1 2.6 2.3 2.0 EV/EBITDA (x) 13.2 12.6 9.9 8.5 7.3 Source: Compan y, Angel ResearchCMP `113 Target Price -Investment Period - Stock Info Sector Net debt ( `cr) 11,682 Bloomberg Code Shareholding Pattern (%) Promoters 45.9 MF / Banks / Indian Fls 6.4 FII / NRIs / OCBs 15.7 Indian Public / Others 32.0 Abs. (%) 3m 1yr 3yr Sensex 8.5 18.6 22.3 Idea 33.9 24.8 93.1 Face Value ( `) BSE Sensex NiftyReuters Code 37,263 0.7 124/71 37,358 Telecom Avg. Daily Volume Market Cap ( `cr) Beta 52 Week High / Low 10 20,005 6,056 IDEA.BO IDEA@IN +91 22 3935 7800 Ext: 6819 [email protected]Performance highlights 3QFY2013 Result Update | Telecom January 30, 2013
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Please refer to important disclosures at the end of this report 1
EBITDA 1,473 1,423 3.6 1,345 9.6
EBITDA margin (%) 26.4 26.8 (36)bp 26.7 (32)bp
Source: Company, Angel Research
For 3QFY2013, Idea Cellular (Idea) reported mixed results with revenue coming
in in-line with expectations while operating margin surprised negatively. The
company’s total network minutes grew by 5.2% qoq, leading to a growth in
network traffic to 132bn min. The average revenue per minute (ARPM) declined
by 0.5% qoq to ` 0.41 due to decline in non-voice revenues’ share to 14.6% from15.6% in 2QFY2013. The Management indicated that the company has not hiked
headline tariff (as of now), but has only reduced promotional offers, that too in
specific circles.
For 3QFY2013, Idea reported a consolidated revenue of
` 5,579cr, up 5.0% qoq, on the back of a sharp qoq increase in minutes of usage
(MOU) to 384min, up 7.0% qoq. The company’s EBITDA margin declined by
36bp qoq to 26.4% primarily because of qoq increase in access costs (up 40bp),
network costs (up 20bp) and subscriber acquisition, advertisement and promotion
expenses (up 40bp). The PAT came in at ` 229cr, down 4.8% qoq, marred by a
forex loss of ` 13.3cr as against a forex gain of ` 18.0cr in 2QFY2013.
During 3QFY2013, Idea won back 1,800MHz spectrum
in all its seven circles in the 2G auction conducted by the government in
November 2012, for which licenses had been quashed by the Supreme Court.
Post the 2G auction, only four operators have pan-India presence. Idea’s
Management indicated that the company has not hiked headline tariff (as of now)
and has only reduced promotional offers, that too in specific circles. However, it
reiterated its stance that tariff hikes are becoming imminent. Going forward, we
expect ARPMs to improve as Idea has hiked tariffs via reduction of promotional
offers. This should offset the rising input and regulatory costs. With increase in
tariff rates expected going ahead, we have factored in a revenue CAGR of 10.7%
over FY2012-14E. Idea still remains surrounded by regulatory uncertainties in the
sector such as one-time spectrum fee and spectrum refarming. With the 2G
auctions coming up in March 2013, we expect partial resolution of these
uncertainties, and the same would be a positive for the sector as a whole.
This should offset the rising input and regulatory costs. The consolidated net debt
of the company increased by 10% qoq to ` 12,914cr, due to payment for 2G
spectrum in seven circles (re-bid and won in November 2012; net payment of
` 1,346cr after adjusting for 2008 outlay for the entry fee paid by it for the nine
licenses it acquired). Idea incurred a capex of ` 654cr in 3QFY2013; 9MFY2013
capex stood at ~ ` 2,000cr. The capex guidance for FY2013 has been revised
downwards to ~ ` 3,000cr vs the earlier guidance of ~ ` 3,500cr (does not include
payment for spectrum).
With a hike in tariff rates expected going ahead, we have factored in an 8.5% yoy
revenue growth for FY2014E. We expect revenues to witness a 10.7% CAGR over
FY2012-14E. Idea still remains surrounded by regulatory uncertainties with regards
one-time spectrum fee and spectrum refarming. The company has received a
notice from DoT for one-time spectrum fees of ` 2,114cr, which the company has
appealed to the Bombay High Court. The court has asked the government not totake any coercive action against the company until March 1, 2013, when the case
will be heard. Post these hearings and the next round of auction by March 2013,
most of the regulatory uncertainties, which had remained an overhang on the
sector, would get clarified, which is positive for the sector.
Idea Cellular (Idea), part of the Aditya Birla Group, is the third largest
telecommunication service provider in India in terms of revenue. The company
provides mobile services in all the 22 circles of the country and has 116mn
subscribers. Idea had won 3G licenses in 11 out of the 22 circles in India and is
currently providing 3G services in 20 circles (in seven circles by 3G roamingagreements). The company also holds a 16% stake in Indus Towers, which is a JV
with Bharti Airtel, Vodafone and Idea.
Profit and loss account (Consolidated, Indian GAAP)
Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make
such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies
referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and
risks of such an investment.
Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make
investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this
document are those of the analyst, and the company may or may not subscribe to all the views expressed within.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals.
The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking orother advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in
the past.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.
Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, pleaserefer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited andits affiliates may have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement Idea Cellular
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors