IDEA Cellular Limited

July 3

2011 In-depth financial analysis of Idea Cellular Limited, supplemented by competitive benchmarking against competitors in the market.

Company Report

Analyst Name:

Rajat Dhar

July 3, 2011 [IDEA CELLULAR LIMITED]

FinExpertise | Confidential

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

IDEA CELLULAR LIMITED

Key Stock Indicators

Bloomberg Ticker: IDEA:IN CMP(as on 07 Jul 2011): `81.35 Shares Outstanding(Mn): 3,303.757

Face Value/per Share: INR 10.0 52-Week Range: `(82.55-55.65) Beta vs Sensex: 0.847

DIV. Yield(%): 2.4 Market Cap (as on 01 Jul’11-[in Mn]) 260,501.200 90-Day Volatility: 28.220

Key Financial Indicators

(in Mn) Mar-08 Mar-09 Mar-10

Revenue 67,199.90 99,164.50 1,18,957.70

EBITDA 22,712.80 28,165.00 29,262.50

PAT(INR Mn) 10,443.90 10,082.10 10,536.60 PAT Margins (%) 16.59 9.27 8.67

EPS (INR/sh.) 3.96 3.01 3.06

OPM % 33.8 28.4 24.6

NPM % 15.54 10.17 8.86

Source: http://www.bseindia.com/

38.85%

15.03%8.35%

6.68%

30.51% 0.58%Indian (Promotor)

Institution

FII

DII

Indexed Price Chart

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BSE(vol) SENSEX IDEA

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 subscribers market share. Idea is the 3

rd 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, India’s 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

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-à-vis market

Returns(%)

YTD 1-m 3-m 12-m

Idea Cellular Ltd. 16.57 15.24 22.21 37.23

NIFTY 50 -4.66 5.27 -1.69 14.54

Source: http://morningstar.com/

Share Holding Pattern

July 3, 2011 [IDEA CELLULAR LIMITED]

FinExpertise | Confidential

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 Bharti Airtel Reliance Comm MTNL

Revenue 1,53,890.00 3,80,158.00 1,21,297.70 38,412.13

EBITDA 31,280.70 1,30,503.00 9,128.70 -9,615.18

EBITDA margins(%) 20% 34% 8% -25%

PAT(INR Mn) 8,446.00 77,169.00 -7,579.90 28,269.53

PAT margin (INR Mn) 5% 20% -6% -74%

EPS (INR/sh.) 2.56 20.32 -3.67 -44.87

PE(x) 31.78 19.59 -26.61 -0.99

P/BV (x) 22.76 n.a. n.a. n.a.

n.a: Not Available

(Mar-11) Source: http://www.bseindia.com/

July 3, 2011 [IDEA CELLULAR LIMITED]

FinExpertise | Confidential

FINANCIAL PRO FILE

Idea Cellular Bharti Airtel Reliance Comm MTNL

LTP 81.35 398.1 97.65 44.3

52 W H / L 82.55 / 55.65 409.45 / 277.40 195.40 / 74.65 72.75 / 38.00

Sales 1,53,890.00 3,80,158.00 1,21,297.70 38,412.10

PAT 8,446.00 77,169.00 -7,579.90 -28,269.50

Equity 33,032.70 18,988.00 10,320.10 6,300.00

OPM (%) 20.33 34.33 7.53 -25.03

NPM(%) 5.49 20.3 -6.25 -73.6

Source: http://www.bseindia.com/ (Mar-11)

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

Key Financial Indicators

(in Mn) Mar-08 Mar-09 Mar-10 Mar-11

Revenue 67,199.90 99,164.50 1,18,957.70 1,53,890.00

EBITDA 22,712.80 28,165.00 29,262.50 31,280.70

PAT(INR Mn) 10,443.90 10,082.10 10,536.60 8,446.00 PAT Margins (%) 16.59 9.27 8.67 5%

EPS (INR/sh.) 3.96 3.01 3.06 2.56

OPM % 33.8 28.4 24.6 20.33

NPM % 15.54 10.17 8.86 5.49

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 India’s resurgent India’s 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)

Top-line grew by at a CAGR of

~31.81% between FY’08 and

FY’11.

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.

July 3, 2011 [IDEA CELLULAR LIMITED]

FinExpertise | Confidential

Focus Charts:

Shareholding Pattern (%) Mar-11 Dec-10 Sep-10 Jun-10 Mar-10

Promoter and Promoter Group 46.04% 46.96% 46.97% 46.98% 46.99%

FII 9.90% 9.70% 7.58% 6.05% 7.40%

DII 7.91% 6.99% 7.76% 7.71% 7.52%

Non Institutions 36.15% 36.35% 37.69% 39.26% 38.09% Source: http://www.bseindia.com/

05

10152025303540

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

OPM % NPM %

Movement in Operating & Net Margins

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

EPS (INR/sh.)

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

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PAT(INR Mn) PAT growth (y-o-y)

MANAGEMENT Name Designation

Himanshu Kapania Managing Director

Sanjeev Aga Director

Pankaj Kapdeo Company Secretary & Compliance Officer

Ambrish Jain Deputy Chief Executive Officer

July 3, 2011 [IDEA CELLULAR LIMITED]

FinExpertise | Confidential

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.

Disclaimer This report is based on data publicly available or from sources considered reliable. Analyst does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are analyst’s current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person – especially outside India or published or copied in whole or in part, for any purpose. Analyst is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'FinExpertise' at +91-9999760359, or via e-mail:rajat.dhar1@yahoo.com.