Idea Cellular, the Aditya Birla Group company, today posted a consolidated net profit of Rs 266 crore in the fourth quarter, 4.5 per cent higher than the Rs 255 crore in the same quarter last year. The company’s total revenue for the quarter ended March was Rs 3,347 crore, up 14 per cent as compared to the Rs 2,941 crore posted in the corresponding quarter last year.
The consolidated profits include that from a 41.09 per cent stake in Spice Communications, which the company acquired in June 2008, and a 16 per cent stake in Indus Towers, a joint venture company floated by three major telecom operators—Bharti Airtel, Vodafone and Idea.
Idea Cellular has planned capital expenditure of Rs 3,000 crore in 2010-11. This is for the standalone company and does not include payouts for the ongoing 3G spectrum auction and any expenditure which goes with it. The company already has approval from lenders to borrow Rs 9,400 crore and has tied up for Rs 7,000 crore. In addition, the company has Rs 1,400 crore cash on the balance sheet and Rs 550 crore given as a loan to Indus Towers, to be recovered in a few days.
The telecom industry has been facing rough weather, with competition up from new companies, who have drastically cut rates to gain market share. Idea’s quarterly results have suffered on this account, as its average revenue per user (ARPU) fell by 27 per cent to Rs 185 in the quarter under review from Rs 255, in the same quarter last year. Its minutes of usage fell by around one per cent.
“Minutes of usage is growing faster than revenue growth because prices are going down. In the absence of a choice, many new players are reducing prices. Price cuts have a domino effect. At this level, prices are hurting stronger players,” said Sanjeev Aga, Managing Director.
Aga lashed out at the price cuts by newer players and said the ‘free talk time’ phenomenon is making consumers shifting from one operator to another. He said if stronger players were getting affected by the price war, the effect on the earnings of newer players would be worse. “The weaker players are haemorrhaging at a bloodbath level,” he said.
The company believes these low rates were like ‘air pockets’, and the price war situation might not have a great effect in 2010-11.