Idea’s superior execution can be seen both in its sustained revenue share gains as well as better cost control vs. peers. Idea has gained revenue share in all its top 5 revenue generating circles in the last 3 years. Vodafone has gained in 4; Airtel has lost in all 5 of its biggest circles. The top 5 circles for each operator contribute 50-60% to their topline.
Idea Cellular has shown sustained margin improvement vs. flat to declining trends by RCOM and Bharti. The sustained improvement on better cost control is especially commendable as it straddles its 2 roles – incumbent in 11 circles and new entrant in the remaining.
Sector trends continue to show improvement – 1) Churn – A good indicator of competitive intensity, has fallen sharply for all operators in the last 2 quarters; and 2) Mins growth – Surviving telcos are benefitting from high mins growth as they capture mins from networks that are either shutting or scaling down.
2 failed auctions should lead to lower spectrum price. Idea, with its smaller B/S, will benefit more vs. larger operators from any cut in spectrum price. Idea has the lowest leverage among all operators and will be the only operator that should start recovering its cost of capital starting FY14E.