A close call

India's third-largest operator has secured its turf. Can Idea make the most of its costliest spectrum purchase?

If there is one business that is the crown jewel in the Aditya Birla group’s portfolio, it is telecom. Today, Idea Cellular is the group’s most profitable company and has been a big success story, given its chequered past. From a distant sixth in 2006, it is today the third-largest player in the country, with 158 million subscribers — over half of them from rural India — and 22 circles under its belt. Its operational turnaround has been backed by an equally strong financial performance, with its top line and profits showing a CAGR of 33% and 34%, respectively, over the same period. 

Not surprising, then, that the stock always traded at a premium to industry leader Bharti Airtel, which is still grappling with its expensive African purchase. Strategically staying away from urban pockets — where the biggies were slugging it out in a bloody price war — has helped Idea thus far. The recent spectrum auction, the fifth since 2010, in that sense, was critical for the company, since its bread-and-butter circles were up for grabs. The company aggressively bid and won back the circles but ended up paying a huge price to stay in the business.

At a time when tariff increases are hard to come by, subscriber additions are no longer cheap and 3G investments are yet to pay off, the entry of Reliance Jio into the fray only queers the pitch further. If competition goes for aggressive price cuts, it’s unlikely that Idea can choose to look the other way. But to service its humongous debt, Idea will need to hike prices and continue to add subscribers at a healthy clip. 

Whether or not the company will be able to achieve that and make the most of its costly recharge is what the cover story is all about. Among other stories, we have a  feature on Bata, which is looking to replicate the success it achieved with Hush Puppies by setting up exclusive outlets of its oldest brand — Power — in India. Also, in investing, we take a look at new logistics star on the block  VRL Logistics, which made a stunning debut in a falling market.