Axiata-Your Deepavali Plan,please?

The plan by India’s second largest mobile operator, Reliance Communications to offer the cheapest tariff in the country is expected to pressure Axiata’s associate, Idea Cellular so says ECM Libra Investment Research today.

The disruptive plan, which allows both prepaid and postpaid users to make calls at only US $1 cent/min (RM0.36) nationwide, would see Axiata facing significant pressure on margins and downside risks to revenue and subscriber growth.

In a research note, ECMLibra said on average subscribers paid US $2 cents/min for local calls, while national long-distance calls were at about US $3 cents/min.

ECM Libra speculates Axiata is expected to respond quickly to avoid problems and maintain its growth trajectory, as the next several weeks coincide with Deepavali and the wedding season in November and December.

A decision is crucial to ensure it does not lose out as mobile usage and new subscriber additions will likely surge during the period.

However, being only the fifth largest among 11 players, Idea may not have the clout to go head-to-head with Reliance in a price war.

Reliance currently operates on a subscriber base of 84.8 million with an Earnings Before Interest, Taxes, Depreciation, and Amortization (Ebitda) margin of 39.1 per cent.

Idea on the other hand has 50.1 million subscribers and a Ebitda margin of only 28.9 per cent.

The market leader, Bharti Airtel, leads with 110.9 million subscribers and Ebitda margins of 40.6 per cent.

So, what is you Deepavali plan, Axiata?

Think Tangram.........