Axiata Group; Hold; RM4.73
Price target: RM4.80; AXIATA MK
India court moves to cancel 122 cellphone licenses

The India Supreme Court ruled that 122 cellphone licenses that were issued in 2008 be revoked, including Idea Cellular's nine licenses and four from Spice Communications Ltd, which Idea has a 41% stake in. Axiata owns c.20% in Idea Cellular.

However, the company would be allowed to continue operations for the next four months until a new auction for licenses is conducted. We understand this ruling is due to corrupt practices in the sale of the licenses at lower than market prices, costing the Indian treasury as much as US$36bn in revenue.

We expect minimal earnings impact from this as it is not a major contributor to Axiata's bottom line (Idea contributes associate income to Axiata; it made RM598m in 2010 which translated to a share of RM119m (or 3.7%) to Axiata's FY10 pretax profit). We maintain our Hold call with RM4.80 TP pending further updates on the matter.

Source: HwangDBS Research 3 Feb 2012