Friday May 21, 2010
By LEONG HUNG YEE
hungyee@thestar.com.my
Idea wins 3G auction in 11 circles
KUALA LUMPUR: Axiata Group Bhd's 20%-owned Idea Cellular Ltd has won the 3G spectrum in 11 circles in India, including eight circles where it has a strong presence, as the spectrum auction ended in the country.
When contacted, an Axiata spokesman said: “No comment, as Idea has yet to make an official announcement.”
Idea was reported to have forked out 57.7 billion rupees (RM4bil) for the cost of its spectrum. Among the circles Idea won are Maharashtra, Gujarat, Andhra, Kerala, Punjab, Haryana, Madhya Pradesh and Himachal Pradesh.
The Indian newspapers reported that the 34-day 3G spectrum auction yielded the Indian government US$14.6bil in revenue, nearly twice what it had expected. The highest bids were for the Delhi and Mumbai circles, which cost 32 billion rupees (RM2.24bil) and 33 billion rupees (RM2.31bil) respectively, won by Bharti Airtel, Vodafone Essar and Reliance Communications.
The 3G spectrum enables subscribers to download high-speed data and stream videos on mobile telephones. The successful bidders will be allotted air waves in September.
A Singapore-based analyst said the proceeds from the spectrum auction was no doubt good news for the Indian government. “The concern would be whether all the money will actually go in. For the operators, it's a large sum of money and that has to be paid out. We have to see how these services are priced and received by the subscribers and how it will impact their profitability,” he said, adding that telcos might have to fork out even more when the Indian government started the broadband wireless access spectrum auction.
A local bank-backed analyst said the US$1.3bil cost for Idea to secure its 3G spectrum was more than the US$1bil its management had guided for.
“The additional US$300mil required could be met by monetising some of its assets or a cash call. If Idea requires a cash call, Axiata's portion works out to be around US$60mil.
“This does not appear to be too bad compared with management's worst-case scenario guidance of US$200mil to US$300mil,” he said, adding that Axiata had raised quite a bit of cash from the selldown of its stake in XL Axiata.
“In any case, we do not expect Axiata to declare any dividends for this year,” he said.
Meanwhile, ECM Libra Investment Research was generally positive on the approach taken by Idea to focus on its strongest circles, saying it made most business sense as it would enable Idea the best chance to recoup the high costs spent on the 3G spectrum.
It believes Idea will very likely raise new funds in a combination of debt and equity given its cash balance of 14.2 billion rupees (RM1bil).
“Idea's gross debt-to-equity ratio currently is only 0.68 times, which gives it room to leverage up to 1.0 times, thus raising an additional 38 billion rupees (RM2.66bil),” the research house said, adding that there would still be a shortfall of 19.7 billion rupees (RM1.38bil).
ECM said Axiata would have to cough up RM276mil for its 20% equity stake in the event of a RM1.38bil cash call by Idea, which it believed would have no problem with Axiata given its RM2bil raised from its selldown in XL Axiata.
“This may raise the possibility of a special dividend given the lower-than-expected cash call since Idea did not bid for the pan-India 3G spectrum. However, we still believe special dividends are unlikely given the high 3G capital expenditure network rollout needs in India,” ECM said.
http://biz.thestar.com.my/news/story.asp?file=/2010/5/21/business/6306982&sec=business
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