MOSL: IDEA CELLULAR (Buy)- Another dismal quarter; precarious leverage position
Idea Cellular: Another dismal quarter; precarious leverage position
(IDEA IN, Mkt Cap USD3.5b, CMP INR55, TP INR70, 28% Upside, Buy)
- Muted revenue drags EBITDA: EBITDA declined steeply by 56% QoQ to INR6.6b (26% miss). Adjusted for one-offs in 4QFY18, EBITDA fell 35% QoQ, impacted by adjusted (for tower sale and international IUC) revenue decline of 3% QoQ and cost increase of 11% QoQ. EBITDA margin contracted 12.3pp QoQ to 11.2%. PAT came in at INR2.6b. However, adjusted for an exceptional gain of INR33.6b from sale of standalone towers, the net loss widened to INR17.8b (v/s a loss of INR9.6b in 4QFY18 and estimate of a loss of INR15.7b).
- Declining subscribers, ARPU: IDEA’s subscriber base has now started shrinking (-3% QoQ). Also, blended ARPU declined 5% QoQ to INR100. ARPU pressure is evident for seven quarters now, indicating a temporary shift (until peers offer discounts) toward second SIM usage. However, the declining subscriber base indicates a churn toward peers, which is likely to be a permanent impact. Data/broadband subscribers, too, remained flattish at 46.5m/41m.
- Concall highlights: (1) Reduced channel pay-outs, lower data/voice offerings resulted in declining subscriber growth. (2) Expect Vodafone-Idea merged operations to be effective from Aug-18. (3) Annualized EBITDA for tower business is ~INR3.5-4b; will not form part of consol. EBITDA in coming quarters.
Idea Cellular provides Global System for Mobile Communications (GSM) based mobile services and related telephony services to individuals and businesses in India. The company operates through three segments: Mobility Services, which provides GSM based mobile and related telephony services; International Long Distance (ILD), which provides international long distance services; and Passive Infrastructure, which provides passive infrastructure services. Co. offers 2G and 3G services that comprise roaming arrangements; ILD and other services; and a range of mobile broadband devices, including dongles and 3G smartphones that provide 3G applications and data services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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