Over the past several months, there has been a focus on introducing discipline in the Indian telecom sector in the form of trimming dealer commissions and selective hikes in call charges. These steps have helped companies in improving margins, which is visible in the recently released financial results of Idea Cellular for the quarter ended September 2012. The operator registered 126 per cent growth in its net profit from Rs 1.06 billion for the quarter ended September 2011 to Rs 2.4 billion for the corresponding quarter in 2012. Its gross revenues grew by 15 per cent from Rs 46.19 billion to Rs 53.14 billion during the same period.
Idea’s earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at Rs 14.23 billion for the reported quarter, an increase of 20 per cent from Rs 11.87 billion for the quarter ended September 2011. The EBITDA margins rose to 26.8 per cent from 25.7 per cent during this one-year period. The net debt stood at Rs 106.58 billion as of September 30, 2012, with the net debt-equity ratio at 0.79. Idea maintained its last quarter trend of free cash flow (after capex) and registered a cash profit of Rs 12.31 billion. The capex guidance for 2012-13 stands at Rs 35 billion, excluding payments towards spectrum.
On the operational front, the total minutes of usage (MoUs) grew by 18 per cent from 106.22 billion for the quarter ended September 2011 to 125.65 billion for the corresponding quarter in 2012. During the same period, the ARPU declined from Rs 155 to Rs 148 and the average MoUs per user decreased from 364 to 359.
The company increased its non-voice service revenue contribution to total service revenues to 15.6 per cent from 13.2 per cent during this period.
Of the operator’s 115 million subscribers (as on August 31, 2012), 94.1 per cent were on the visitor location register (VLR), the highest in the industry. Idea added 18.95 million VLR subscribers between September 2011 and August 2012. In terms of mobile number portability, the company recorded a net gain of 4 million customers as on October 6, 2012.
Idea continued to invest in long-term value creators and launched 1,919 2G and 1,104 3G cell sites during the quarter ended September 2012. At present, the service provider has 85,779 2G and 14,467 3G cell sites (Node B). It has also witnessed growth in new business streams such as international long distance and internet services. Its total national and international long distance minutes stood at 11.04 billion and 914 million respectively. The company is also targeting consumers in the media and large enterprise segment and is planning to enter the MPLS and Wi-Fi space.
Overall, the wireless telecom business witnessed slow growth during the quarter under review mainly due to an uncertain regulatory environment, weak seasonal demand and hyper competition in the market. While the company was free-cash-flow positive in the reported quarter, the next few years would see Idea spending significantly on excess spectrum and licence renewal charges.
Going forward, the operator is confident about overcoming the regulatory challenges and consolidating its position in the market. To ensure this, it has decided to bid aggressively in the upcoming 2G spectrum auction. As per the Department of Telecommunications, Idea has deposited Rs 13.07 billion as earnest money, the highest amongst all bidders.