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12:08 AM
bullishmumbai
21/09/2007
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Buy Idea Cellular; target of Rs 152: Merrill Lynch
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Buy Idea Cellular; target of Rs 152: Merrill Lynch
Merrill Lynch is bullish on Idea Cellular and has maintained a buy rating on the stock. Research firm expects a target price of Rs 152.
aMerrill Lynch research report on Idea Cellular
Roadshow takeaways focused on revenue leadership
Idea’s top management ( CEO and CFO) met with investors across Asia, last week. Investors acknowledged the Co’s recent strong performance and queries mostly centered on tower-sharing & spectrum availability. In the meetings Idea emphasized that its revenue leadership across its 7 established operations (barring Delhi) ranks on par with Bharti, based on available industry data. These 7 established circles account for approx40% of all-India wireless subs & approx 84% of Idea’s sub base. Idea expects to remain aggressive in its established circles.
Tower-sharing: beneficial but not easy; early for valuations
Idea highlighted consortium-led tower sharing & co-building of networks as potential routes to improve speed (to market) & spread (i.e. coverage). The Co feels that no single operator can expect to be only a landlord & said recent valuation pointers on tower companies may be a leap too far into the future. Technical challenges and people-issues, i.e. local/circle-wise decision-making, are some of the practical bottlenecks that need to be worked around.
Mumbai launch likely despite spectrum re-farming issues
Idea expects to launch Mumbai operations by end-FY08; the Co believes some spectrum may become available in Mumbai ahead of larger spectrum re-farming Negotiations between the telecom & defense ministries. Idea has acquired anchor sites and switch-locations in Mumbai, and expects to finalize vendors very soon. In Bihar, the Co’s preparations are in early stages as spectrum visibility is lower.
Strengthening execution track record to drive stock upside
We remain Buyers of Idea with a PO of Rs 152. Faster-than-expected break-even in new circles, launches of Mumbai ops, & sustained leadership in established ops present potential upside catalysts. We prefer the majors due to similar valuations.
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