Continuing with our series comparing Idea Cellular with 'big brother' Bharti, in this article we will compare the key operating metrics of Bharti Airtel and Idea Cellular, which will throw light on which is the better of the two.
The mobile or the wireless business is the largest contributor to revenues for both the companies particularly for Idea Cellular. As a result, we would be comparing the operating numbers for the Indian mobile business of these companies.
Let's first start with the revenue numbers over a period of time.
If we compare the average revenue per user (ARPU) of the two, we see Bharti clearly emerging as a leader.
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Source: Company data |
If we delve deeper and look at the revenue or rate per minute (RPM) profile, we see a different picture. Idea Cellular has given Bharti a run for its money when it comes to RPM. And let us face it; comparing RPM is better than comparing ARPUs. This is due to the business models adopted by the companies in India. In India, the telecom business is more like a 'minute factory' wherein the minutes drive the revenues as well as the profitability for the companies. As minutes increase, the costs get apportioned over a larger base thus giving rise to lower cost per minute. The only thing driving profits then would be the rate that the company is able to charge for its minutes.
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Source: Company data |
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Source: TRAI |
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Source: Company data |
It is important for investors to compare the operating metrics of these companies keeping the shareholder returns in mind. But what matters is how the two companies rank up in terms of their financials as well as their valuations. We will cover these in our next and final article in the series.
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Sundaravaradan S
Mar 29, 2012Idea Vs. Bharti:
To me the Author appears to be clearly biassed towards Idea; although the Graphs clearly shows Bharti is better than Idea.
Hope the next article, the Author writes more clearly.