Idea Cellular continues to execute strongly in this market, as seen by its
operational trends. Idea is reducing promotional minutes in the system. It estimates that if all promotional minutes were removed, this could result in around 8-10 paisa improvement in voice yields – although it would be hard to achieve this in one shot or in entirety. This will have to be combined with some increase in headline tariffs.
Idea has chalked out a strategy where total customer spend would not be impacted if they increase tariffs, though there is need to balance with minutes elasticity. But any tariff hike will be a slow process and occur in stages. RPMs in past 4 quarters have been broadly flat, but it expects to see an improvement in the current quarter.
Capex is expected to stay around INR 30-35bn and it notes that the allocation is more towards data with more investments in fibre, and IT platforms for data services. Advertising costs should come down as % of sales, although it will
also need to spend on promoting data.
3G On 3G roaming issue, a decision is still pending from the courts. Idea could look to acquire 3G spectrum, if need be. Currently there are less than 10% 3G handsets in the system; hence, the ecosystem is not fully in place. More than affordability, it believes making the service relevant and increasing awareness are key.
Idea is seeking the regulator to allow telcos to retain 5Mhz of 900 band, the impact could be more manageable, as they could continue to provide services on this quantum of spectrum. Anything below 5Mhz would be insufficient and challenging. Incremental auctions of 3G 2100Mhz spectrum and 700Mhz are the key events to watch for.