Idea Cellular has a higher rural exposure than other larger telcos. Since the rural consumers have greater usage of plain 2G Voice, Idea will be more vulnerable in case the trend of unlimited voice plans pick up (Airtel followed Jio in launching unlimited packages). Reliance Jio has further highlighted the launch of affordable VoLTE mobile handsets at price points of less than Rs 2,000 targeting the mass rural consumers.
Idea’s exposure to high-end urban consumer is lower than top 2 telcos and hence would see a relatively slower data growth to offset voice decline. With market likely to undergo a round of tariff cuts post ending of Jio’s free tariff offers, we expect the negative operational leverage to materially hit.
With Jio extending free offer by 3 months, we are seeing telcos like Bharti Airtel responding by offering aggressive offerings like below. In our view further tariff cuts will happen around the time Jio pulls off its free offering. Idea has yet not responded to Airtel’s recent tariff plans. We consider both scenarios – Idea responding by cutting tariffs and not responding to be negative.
Can the just in time execution of Kumarmangalam Birla stand the test of time is anybody’s guess.