IDEA Cellular Limited

July 3

2011
Company Report
Analyst Name: Rajat Dhar

In-depth financial analysis of Idea Cellular Limited, supplemented by competitive benchmarking against competitors in the market.

GSIC Industry: Telecom | Sub Industry: Cellular Telecom |Website: www.ideacellular.com

July 3, 2011

[IDEA CELLULAR LIMITED]

IDEA CELLULAR LIMITED

Key Stock Indicators
Bloomberg Ticker: Face Value/per Share: DIV. Yield(%): IDEA:IN INR 10.0 2.4 CMP(as on 07 Jul 2011): 52-Week Range: `81.35 `(82.55-55.65) Shares Outstanding(Mn): Beta vs Sensex: 90-Day Volatility: 3,303.757 0.847 28.220

Market Cap (as on 01 Jul11-[in Mn]) 260,501.200

Idea Cellular Limited was incorporated in 1995. The company is among the top five mobile telephony players in India with an 11 per cent all-India rd subscribers market share. Idea is the 3 largest wireless service provider in India. Idea added 14 out of its total 22 service areas in the past four years. Today it is a pan-India player with commercial operations in all 22 service areas. Idea holds 900MHz spectrum in 9 service areas covering ~48% national revenue. Idea holds 16 per cent stake in Indus Towers, a joint venture with other telecom majors Bharti Airtel and Vodafone. Indus Towers is the world's largest tower company with over one lakh towers. In 2007, Idea was listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). KEY HIGHLIGHTS Idea rings in the Power of 3G IDEA Cellular, Indias third largest mobile operator today announced on March 28, the launch of its Gold Standard 3G services that will catapult mobile communication services and transform user experience. The third generation of mobile communication systems, 3G, lets customers use an extensive range of high-end data services on a wide variety of handsets and other devices. Idea announced the launch of 3G services on its network in MP & Chhattisgarh, Gujarat and Himachal Pradesh. To anchor the occasion, Idea unveiled a new 3G logo. The new branding will be implemented throughout India, across all customer touch points Idea Cellular Limited Looking At Options To Monetize Tower Business Outside Of Indus Towers JV-DJ

Key Financial Indicators (in Mn) Revenue EBITDA PAT(INR Mn) PAT Margins (%) EPS (INR/sh.) OPM % NPM % Mar-08 67,199.90 22,712.80 10,443.90 16.59 3.96 33.8 15.54 Mar-09 99,164.50 28,165.00 10,082.10 9.27 3.01 28.4 10.17 Mar-10 1,18,957.70 29,262.50 10,536.60 8.67 3.06 24.6 8.86

Source: http://www.bseindia.com/ Share Holding Pattern

30.51%

0.58% 38.85%

Indian (Promotor) Institution FII

8.35% 6.68%

15.03%

DII

Indexed Price Chart

150 100 50 30000 25000 20000 15000 10000 5000 0

Idea Cellular Limited is looking to monetize the 9,000 telecom towers that it owns outside the Indus Towers Ltd joint venture (JV) and plans to use Stock Performances vis--vis market Returns(%) Idea Cellular Ltd. NIFTY 50 Source: http://morningstar.com/ YTD 16.57 -4.66 1-m 15.24 5.27 3-m 22.21 -1.69 12-m 37.23 14.54

1.8.10

1.4.10

1.6.10

1.2.11

1.4.11

1.10.10

BSE(vol)

1.12.10

SENSEX

1.6.11 IDEA

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July 3, 2011

[IDEA CELLULAR LIMITED]

the funds to reduce its debt. Plans for monetizing the towers include hiving them off and selling them to a telecom tower operator. (Jones)
Idea Cellular Limited Moves TDSAT Against DoT Notice To Cancel Licence-Business Standard

Idea Cellular Limited has approached sectoral tribunal TDSAT against a DoT notice to cancel its licence in Punjab for violating merger and acquisition (M&A) norms. On April 21, the Department of Telecom (DoT) issued show cause notice (SCN) to Idea as to why its licence for the Punjab circle should not be cancelled on violation of M&A norms. The company has also been slapped with Liquidated Damages (LD) for not rolling out its services as per the norms in the same circle. As per the terms, a licensee is not allowed to merge or amalgamate with any other company for the first three years. (Standard)
Bharti Airtel Limited, Vodafone Essar Ltd. And Idea Cellular Limited Close To Signing 3G Pact-DJ

Bharti Airtel Limited, Vodafone Essar Ltd. and Idea Cellular Limited are close to signing an agreement to share their third-generation radio bandwidth. The agreement, if signed, will allow the companies to bring down their average cost of radio bandwidth by accessing each other's networks in areas where they don't own 3G licenses. The three companies had separately said earlier that they were in talks with other 3G license owners for tie-ups to share networks in areas where they didn't hold licenses. (Jones) BACKGROUND Incorporated as Birla Communications Limited on March 14, 1995 & granted a certificate of commencement of business on August 11, 1995. With effect from January 1, 2001 following our merger with Tata Cellular Limited the joint venture agreement between AT&T Corporation & Grasim Industries Limited dated December 5, 1995 was replaced by a shareholders agreement dated December 15, 2000 entered into between Grasim Industries Limited on behalf of Aditya Birla Group, Tata Industries Limited on behalf of Tata Group & AT&T Wireless Services Inc. on behalf of AWS Group following which name was changed to Birla Tata AT&T Limited on November 6, 2001. Consequent to the introduction of 'Idea' brand, name was changed to Idea Cellular Limited on May 1, 2002. (Solutions) COMPETITIVE POSITION
Peer Comparison Idea Cellular Revenue EBITDA EBITDA margins(%) PAT(INR Mn) PAT margin (INR Mn) EPS (INR/sh.) PE(x) P/BV (x)
n.a: Not Available
Source: http://www.bseindia.com/

Bharti Airtel 3,80,158.00 1,30,503.00 34% 77,169.00 20% 20.32 19.59 n.a.

Reliance Comm 1,21,297.70 9,128.70 8% -7,579.90 -6% -3.67 -26.61 n.a.

MTNL 38,412.13 -9,615.18 -25% 28,269.53 -74% -44.87 -0.99 n.a.

(Mar-11)

1,53,890.00 31,280.70 20% 8,446.00 5% 2.56 31.78 22.76

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July 3, 2011 FINANCIAL PRO FILE

[IDEA CELLULAR LIMITED]

Idea Cellular LTP 52 W H / L Sales PAT Equity OPM (%) NPM(%) Source: 81.35 82.55 / 55.65 1,53,890.00 8,446.00 33,032.70 20.33 5.49 http://www.bseindia.com/

Bharti Airtel 398.1 409.45 / 277.40 3,80,158.00 77,169.00 18,988.00 34.33 20.3

Reliance Comm 97.65 195.40 / 74.65 1,21,297.70 -7,579.90 10,320.10 7.53 -6.25
(Mar-11)

MTNL 44.3 72.75 / 38.00 38,412.10 -28,269.50 6,300.00 -25.03 -73.6

Revenue grows at ~31.81% but PAT plummeted by ~6.83%.

Top-line grew by at a CAGR of ~31.81% between FY08 and FY11. However, EBITDA, in the same tenor showed a CAGR of ~11.26%, while EPS, OPM% & NPM% showed a downward trend. Even after global recovery we can see steady decrease in the PAT Margins(%) from 16.59% in 2008 to 5% in 2011. Key Financial Indicators
(in Mn)

Mar-08 67,199.90 22,712.80 10,443.90 16.59 3.96 33.8 15.54

Mar-09 99,164.50 28,165.00 10,082.10 9.27 3.01 28.4 10.17

Mar-10 1,18,957.70 29,262.50 10,536.60 8.67 3.06 24.6 8.86

Mar-11 1,53,890.00 31,280.70 8,446.00 5% 2.56 20.33 5.49

Revenue EBITDA PAT(INR Mn) PAT Margins (%) EPS (INR/sh.) OPM % NPM %

INDUSTRY PROFILE The Indian Telecommunications network is the third largest in the world and the second largest among the emerging economies of Asia. Today, it is the fastest growing market in the world. The telecommunication sector continued to register significant success during the year and has emerged as one of the key sectors responsible for Indias resurgent Indias economic growth. It has also undergone a substantial change in terms of mobile versus fixed phones and public versus private participation. The preference for use of wireless phones has also been predominant in the sector. Participation of the private entities in the telecom sector is rapidly increasing rate there by presenting the enormous growth opportunities. There is a clear distinction between the GSM and CDMA technologies used. With increasing penetration of the wireless services, the wireline services in the country is becoming stagnant. On the other hand, Broadband demand has picked up and promises to stabilise fixed line growth. (CCI)
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July 3, 2011 Focus Charts:

[IDEA CELLULAR LIMITED]

Movement in Operating & Net Margins

40 35 30 25 20 15 10 5 0 Mar-08 OPM % NPM % 5 4 3 2 1 0 Mar-09 Mar-10 Mar-11

EPS (INR/sh.)

Mar-08 Mar-09 Mar-10 Mar-11

0.10 0.05 0.00 Mar-08 Mar-09 Mar-10 Mar-11 -0.05

12,000.00

10,000.00

8,000.00

6,000.00 -0.10 4,000.00 -0.15 -0.20 -0.25 2,000.00

MANAGEMENT
Name Himanshu Kapania Sanjeev Aga Pankaj Kapdeo Designation Managing Director Director Company Secretary & Compliance Officer Deputy Chief Executive Officer

PAT(INR Mn)

0.00 PAT growth (y-o-y)

Ambrish Jain

Shareholding Pattern (%)

Mar-11 Promoter and Promoter Group FII DII Non Institutions
Source: http://www.bseindia.com/

Dec-10 46.96% 9.70% 6.99% 36.35%

Sep-10 46.97% 7.58% 7.76% 37.69%

Jun-10 46.98% 6.05% 7.71% 39.26%

Mar-10 46.99% 7.40% 7.52% 38.09%

46.04% 9.90% 7.91% 36.15%

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July 3, 2011

[IDEA CELLULAR LIMITED]

Bibliography
CCI. Corporate Catalyst India. 8 July 2011. <http://www.cci.in/>. http://www.adityabirla.com/. <http://www.adityabirla.com/>. Jones, Dow. Reuters. 27 June 2011. <http://in.reuters.com/>. Solutions, Dion Global. Money Control. 8 July 2011 <http://www.moneycontrol.com>. Standard, Business. Reuters. 29 April 2011. <http://in.reuters.com>.

For more copies or other information, contact Institutional/Retail: Rajat Dhar Phone: + (91) 999760359 E-mail: rajat.dhar1yahoo.com FinExpertise, 3rd Floor, Malviya Nagar, New Delhi 110 017.
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