Idea Cellular 3G Launch in 2011 – Big Bang Coverage Expected

After a long time, almost gap of 2 quarters I am back to participating in Conference Calls, though may not be consistent with all Telcos as my pre-occupation with other projects. Excerpts from Idea Cellular call with Mr. Sanjeev Aga CEO and Mr. Akshay CFO [My comments, if any, appear in Italics]

• Mr. Aga is pleased with the quarterly performance – Margins and Profits are meaningful.
• Big Story – From 6.6 Operators / Circle in Jan-2009, it now stands at 10.6 Operators / Circle on a Nationwide Average. With this one would expect loss in revenue market share for Idea, but they have managed to buck the trend and increase it to 12.6% from 9.8%. In the last 12 months Revenue Market Share has risen by 0.9% and they hope to continue with the rising trend. Idea continues to grow stronger in circles where it had established its presence earlier.
• 9 circles of Idea Cellular are in Loss at the operational level, yet the company has managed to report a PAT of Rs 196 cr.
• Traffic Growth – After the tariff war, consumers eventually revert to companies where they have confidence, not only Idea but others as well. Idea will continue to grow [One thing I like in Mr. Aga is his straight forward answers without any bias as well as appreciation for others]
• Idea Cellular 3G Launch – Expected anytime between Dec 2010 and Feb-2011. 3G Spectrum to be used for both – Data services as well as de-congestion of 2g Voice Traffic.
• 2G / 3G Equipment Procurement Issues – Not yet resolved and they believe it is in the last leg and should be resolved in a month or two. Will make the best use of 900 / 1800 / 2100 MHz spectrum available in different circles as and when new technologies provide an opportunity.
• 3G Business – Handsets capable of 3G in India is in single digits [compared to 630 Mn SIM Cards] so it is around 50-55 mn only. Indian operators are not keen on pushing bundled offers of 3G & the Handset as seen in the West as this business model is unlikely to hold good here. Consumer business of 3G will be greater than that of SMEs.
• 3G Coverage – Idea Cellular hopes to cover atleast 25% of current 2G space with a no stingy approach and best quality network rollout within the next 12 months.
• Decline in Tariff  – On a QoQ it has been 5.5% and in future the mgmt hopes will flatten unless there is another round of disruption by new operators supported by courageous banks lending while they continue to bleed. Idea confident of emerging stronger out of the blood bath.
• CAPEX Guidance – Rs 40 to Rs 44 Bn split between 2G / 3G network roll out. 55,000 Km of OFC rolled out across India. Does not feel the necessity to Monetize the Tower Business and its holding in Indus Towers as well.
• On Overlapping License and TRAI M & A guidelines – They are waiting for a notice from the DoT and couldn’t comment without looking into it. Earlier the M&A guidelines was based on subscriber linked criteria, which has been phased out. Very disappointed with new TRAI M&A guidelines and waiting for clarity on the issue as various reports state that the Government may take the issue at Cabinet level and discuss with the PM.

The management was also confident of keep costs under control at all levels. But going forward it will be interesting to see how Idea Cellular business spans out without being an integrated Telecom operator. Any thoughts about being a plain vanilla Wireless operator ?