Focus on execution likely to create shareholder value

Pure-play wireless operator

Our bullish view on Idea Cellular is based on its pure-play wireless business that has the potential to perform significantly better than the past, strong brand and a solid management team led by Mr. Sanjiv Aga and Mr. Anil Jhala that is focused on execution. Industry participants view Idea as the operator that has made significant strides in execution, that bodes well for shareholder value creation.

Idea has under achieved in the past , Significant upside potential

The company has been historically marred by shareholder issues - three different shareholders in AT&T, Tatas and the Birlas each with different and conflicting objectives. With the Birla firmly in control of the company, we expect the focus and execution to improve significantly.

1Q08 results preview

Idea will announce 1Q08 results on July 24, 2007. We forecast revenues of Rs 14.6 billion (growth of 9% qoq), EBITDA of Rs 5 billion (growth of 6% qoq), and net income of Rs 1.3 billion (decline of 31% qoq).

Valuation: Reiterate Buy 2 with Rs 175 price target

We maintain our estimates and Buy 2 rating on Idea. We have revised our target price to Rs 175 (from Rs150) as we roll forward our DCF valuation to September 2008 assuming WACC of 10.8% and terminal EV/EBITDA of 6.5x. We rate Idea as one of our top picks in Asian telcos space.