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BW Businessworld

Idea Cellular: A Very Good Idea

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The biggest thing that Idea Cellular has done in the past one year that has had an impact upon its stock price is making huge additions to its subscriber base (from 89.5 million at end of FY11 to 112.7 million in FY12). The increase surprised a number of analysts who cover the stock; a couple of them said they were surprised because of much lower expectations.

It has expanded its presence — going from 73,668 towers as on 31 March 2011 to 80,637 towers (also 10,902 towers for 3G) at the end of December 2011. The addition increases the subscriber base as well; additions to infrastructure also impact average revenue per customer (Arpu), or more importantly revenue per minute or RPM. Changes in Arpu reflect the quality of its customer base (pre-paid versus post-paid), and the addition of 3G services — at competitive promotional rates — also gave a fillip to its revenues.











Himanshu Kapania, Managing Director, Idea Cellular
(BW Pic by Subhabrata Das)

The stock's one-year return of 46 per cent is more than four times that of the benchmark index (the Nifty 50), and much higher that what other telecom companies returned (Bharti Airtel returned a negative 5.8 per cent over the same period). But the competitive intensity in the sector is quite high; rivals are introducing aggressively priced promotions too.

To its credit, the company is ready for this. It is hedging the pressure on RPM by expanding 3G services to about 3,000 towns and cities (from 2,300 in the first nine months of FY12).

It is an Idea whose time seems to have come, but will it stay? Watch this space.

(This story was published in Businessworld Issue Dated 28-05-2012)