Only a handful tele cos will survive in the long-term: Idea

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Only a handful tele cos will survive in the long-term: Idea

In an interview with CNBC-TV18, Sanjeev Aga Managing Director of Idea Cellular spoke about the latest happenings in his company and sector.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Idea Cellular See previous management interviews See what other Experts & Brokerages are saying about Idea Cellular Idea Cellular BSE | NSE 29/05/12 Are Mutual Funds betting on Idea Cellular?

Q: But in this near-term of consolidation, what do you think will be the key challenge, will be eking out sequential volume growth or revenue growth for a telecom company or will it be indeed defending margins?

A: As I said a while ago, the end result which is desirable for companies which are going to survive is how they are going to widen their profitability gap. Again I am not talking of pre-gestation but long-term profitability gap or profit margins compared to their competitors. The sector margins may go up or go down. But what will really determine who survives and who stays and who gets consolidated is the delta. The smarter companies or the most stronger companies or all companies would be trying to move up and that is what we are trying to do. So one that what can you get a little extra by way of price realization and how can you leverage your spectrum, your technology, your processes, your brands and most importantly your scale, to be able to keep pushing your cost curves down so that you remain at a certain level when others are in the red. The difference in our sector in terms of profitability is not 3-4-5-6%, it goes up to 30-40-50% as a percentage of revenue. That is the reason I have been sticking my neck out and saying that things will happen surprisingly quickly.

Q: How many quarters of pain do you envisage before you get to that Lehman event and things plateau out?

A: You need a parrot to prophecy. This is just to take a punt, I think before June 2010, no later than June maybe earlier you will have some event, which will spell out what is black and white which is already black and white but the world needs to know and once the world knows then other things will rapidly fall into place or out of place.