Idea gains 4% post Q4, but brokerages remain wary of stock

Meanwhile, the operating margin came in at 23 percent, lower than the previous quarter’s 26.1 percent.

Brokerages have highlighted the threat from competition for the stock and red-flagged declining user base as well.

Brokerage: JPMorgan | Rating: Underweight | Target: Rs 70

JPMorgan observed that Idea appears more vulnerable to Reliance Jio’s onslaught on data. “Its 4G coverage is 30% in its 4G circles and we believe that Idea’s 4G penetration/coverage is quite inferior to Bharti’s and RJio’s. This weakness can stand exposed with RJio’s 4G feature phone launch, which will take India’s 4G market to semi-urban/rural areas,” the research firm wrote in its report.

Further, it noted that Idea’s subscribers had decreased for the third successive quarter. It dipped to 38.1 million users, a fall of 29 percent from September 2016. Additionally, JPMorgan also said that it saw an upside risk to the capex guidance of Rs 60 billion as it sees Idea continuing to be left behind in data penetration and coverage. “Of course, it is possible that major investment decisions/course corrections will now be taken by the merged entity,” it added.

Summing it up, it said that the quarter was in line against the backdrop of a tough industry environment though we think that specific to Idea, under-investment can potentially hurt and some operating parameters must look up.

Brokerage: Goldman Sachs

The global investment bank said that Idea’s results show that trends should continue improving for India’s telcos, with Jio starting to slowly raise pricing.

“The key investor focus is likely to stay on Idea’s capex allocation over the next few quarters, its ability to defend market share in non-leadership circles, and the status of asset sales,” it said in a report.

Moreover, Idea’s higher voice realisation and lower usage per subscriber against Bharti could be an indication that the company has lower proportion of subscribers on bundld plans against Bharti. With more users moving to bundled plans, voice revenue could come under pressure in Idea for the coming quarters, it added.

The stock gained over 16 percent in the past one month, while its three day loss stood at over 3 percent. At 13:41 hrs, Idea Cellular was quoting at Rs 94.70, up Rs 2.05, or 2.21 percent on the BSE. It touched an intraday high of Rs 96.70 and an intraday low of Rs 87.30.