Idea Cellular reported good Q4 results, with consolidated revenue of Rs29.3 billion, EBITDA of Rs8.1 billion and PAT of Rs2.7 billion.
The consolidated results include 41.09% proportionate consolidation of Spice Communications and 16% proportionate consolidation of Indus Towers.
ARPU and ARPM (blended tariffs) surprised positively, by 1% and 2%, respectively, although MOU was 1% below our expectation.
Excellent cost control helped Idea beat our standalone EBITDA estimate by 17%. EBITDA margin in 11 existing circles was 29.2% (vs estimate of 25.6%). The new circle EBITDA loss of Rs654m was lower than our Rs984m loss estimate.
In contrast to last quarter, Idea provided selected financial information on Indus Towers, giving more clarity on the various moving parts in the consolidated financials.
We maintain our UNDERPERFORM rating on the stock, given lack of earnings catalysts in next three quarters. We continue to favour Bharti Airtel over Idea for its superior earnings growth and cash flow profile, strong execution and more attractive valuations.
Our 12-month price target is Rs45 based on a DCF methodology. Catalyst: Margin contraction due to seven new-circle launches over the April- December 2009 period that will lead to initial losses before turning around.