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IDEA CELLULAR 3QFY11: Revenue/EBITDA 2-3% above estimates; RPM and traffic growth surprise positively; maintain Buy

Idea Cellular’s 3QFY11 revenue and EBITDA were 2-3% above estimates; PAT was significantly ahead due to lower finance costs.

While revenue surprise was driven by higher traffic growth and lower RPM decline, EBITDA surprise was primarily due to higher contribution from Indus Towers.

 Consolidated PAT grew 42.9% YoY and 35.2% QoQ to Rs.2.43b (est of Rs.1.96b) driven by higher EBITDA growth and lower-than-expected finance costs.

 Mobile traffic (+10.2% QoQ v/s estimate of 8.1%) and RPM (1.2% QoQ decline v/s estimate of 2.8%) surprised positively.

 ARPU increased 0.6% QoQ to Rs.168 (est of Rs.164); MOU per subscriber grew 1.8% QoQ to 401 minutes (est of 398 minutes).

 Idea trades at an EV/EBITDA of 6.9x FY12E and 5.1x FY13E. We expect 27% EBITDA CAGR over FY11-13E led by lower RPM decline, continued volume momentum and 3G launch. Maintain Buy.