Analysis: IDEA

Today’s next pick is IDEA [stockquote]IDEA[/stockquote]. The stock saw a range bound movement till April. After a downward break out of the range, the stock moved to Rs. 75 levels to find support till September. Since then the stock is in an uptrend, and it saw a 52 week high of Rs. 123 in mid-January. In the last three months, the stock has moved +20% vs. +4% of the Nifty’s.

IDEA technical analysis chart

Oscillator RSI and CMO are in no-man’s land. The stock is trading close to the lower end of Bollinger band giving an upward bias.

The MACD line and the signal line are moving parallel to each other and suggest the short –term downtrend to continue. Although, Long-term GMMA lines are well spread out, and hence are giving a bullish sign for the long-term.

IDEA correlation chart

IDEA’s average correlation with the Nifty is 0.41 which is positive. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

IDEA volatility chart

IDEA has a historical volatility in the range of 0.4 to 0.8. The scrip’s volatility is currently in the middle of the range.

Given these technicals, we suggest a short-term sell. For the long-term, we suggest a buy. However trailing stop-losses will be of help in case sudden trend-reversal were to take place.

Read what experts have to say about the Indian telecom sector here.

Indian Telecom: Hope at last?

The telecom sector is finally beginning to turn the corner after a difficult two years that was marked by weak operational performance, record low tariffs due to intense competition and regulatory hurdles.

Late last month, India’s biggest mobile carrier Bharti Airtel and Idea Cellular Ltd slashed discounts and freebies on offer to customers, effectively raising calling costs for mobile users. Vodafone India, the second biggest operator, has also hinted at raising tariffs.


Earlier in September, RCom had raised tariffs by 25% for both post-paid and pre-paid customers. Since these top four operators account for nearly half of mobile phone users in the country, more than 400 million subscribers will have to shell out more by way of mobile bills.

With the exit of players like Etisalat, Swan Telecom and Videocon, consolidation has already begun giving room for large operators to hike tariffs. The tariff hikes will come as a huge relief for the industry struggling with increasing regulatory costs and weak pricing power.

To improve their operational efficiency, many telcos have deactivated inactive subscribers and instead turned focus towards retaining active users rather than aggressively acquiring new ones. The move reflects an operational shift from volume/subscriber growth to increased focus on pricing/margin front.

On the regulatory front, liabilities with regards to one-time spectrum fee and spectrum re-farming are now clear although the exact payout is yet to be determined. News agency PTI has estimated that the government may get around Rs 23,177 crore by way of one-time spectrum fee from operators.


Spectrum re-farming would mean another blow for incumbent operators as re-allotment of spectrum in a higher frequency band will lead to higher capital investment to maintain current service levels.

If 2012 was a year of regulatory uncertainty, 2013 will be a year of a string of litigation as telcos are likely to contest several decisions like abolition of roaming charges, invalidity of 3G roaming agreements and spectrum re-farming.

The three leading operators and the government are fighting it out in the courts on offering 3G services in areas where they do not hold 3G spectrum. Even the reduction of up to 50% in the reserve price of spectrum in the 800 megahertz (MHz) band, used by CDMA operators, has irked GSM operators.

Removal of roaming charges, if implemented, will hit telcos further as earnings from roaming and STD charges will vanish. Coupled with higher re-farming costs of spectrum, tariffs will only rise further from the current levels despite TRAI’s warning that it may intervene in pricing by fixing a cap.


But the biggest turnaround will come once data revenues start picking up as earnings from voice services have stagnated. Future growth will revolve around data services through 3G and broadband wireless services. While currently, high pricing and higher cost of handsets are a major deterrent, accessibility will improve going forward and that would drive average revenues per user.

In short, it all depends on how telcos navigate regulatory headwinds and avoid a race to the bottom on the pricing front. Exciting times ahead!

[stockquote]BHARTIARTL[/stockquote] [stockquote]RCOM[/stockquote] [stockquote]IDEA[/stockquote]

Analysis: IDEA

Today’s pick is [stockquote]IDEA[/stockquote]. The stock has been range-bound between the levels of 75 and 100 for most part of the year. However, since September the stock is moving in an uptrend after testing the support levels. In the last three months, the stock moved 21% against 3% as that of Nifty’s.


Oscillators RSI and CMO are at currently at 64 and 40 are close to the over-bought territory.

MACD line has just crossed signal line from above signaling a bearish move.

The long-term GMMA lines are fanning out giving out a bullish signal, with a synchronized behavior of the short-term lines. A continued trend like this is a bullish sign for the stock.


IDEA’s average correlation of 0.40 with the Nifty is positive. The stock will not be able to replicate the movements of Nifty. [stockquote]NIFTYBEES[/stockquote]


IDEA has a historical volatility in the range of 0.4 to 0.9. The scrip’s volatility is currently in the lower end of the range and hence is not a concern.

Looking at these technicals a short-term sell is suggested. A longer-term buy call could be made after a decisive testing of the up-trend line in place.

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Will mobile ARPU finally rise?

The Economist has a handy chart on the effect of the Supreme Court’s ruling on different telecom operators:


Least we forget, the ham handed sale of 2G spectrum had the perverse effect of unleashing a price war as the new acquirers of below market spectrum went on a customer acquisition tizzy. Airtel was the biggest loser with ARPU sliding from Rs. 292 in 2008 to Rs. 187 in Q3 2011.


The new entrants – Uninor, S Tel and later Videocon were willing to work at Rs. 15-40 ARPU to gain market-share. But with them gone had having to bid for spectrum in an auction, the old schoolers – Airtel, Vodafone, Aircel and RCom – should be able to increase ride the “reversion to mean” of mobile subscription rates.