Idea's net profit soars 86.5%

The company's revenues went up 19% to Rs 6,323 crore as compared to Rs 5,314 crore in the same quarter last year

Idea Cellular has posted an 86.5 per cent jump in its second quarter net profits to Rs 447.6 crore, compared with Rs 240 crore in the year-ago period, on the back of improvement in margins, increase in minutes of usage (MOU), and growth in the high-revenue mobile data business.

The company’s revenues were Rs 6,323 crore in the September quarter, up 19 per cent compared to Rs 5,314 crore in the year-ago period. Earnings before interest tax depreciation and amortisation (Ebidta) margins, improved 4.4 per cent to 38.2 per cent. The telco’s MOUs went up by 10.5 per cent. MOU is the average communication time of a user in a month.

In March this year, the third largest telecom operator had started reducing its free and promotional offers, which also contributed to an increase in margins. “People had wondered if it was a one-off performance during our results in the previous quarter. We are happy we could sustain our good performance,” said Akshay Moondra, the chief financial officer of Idea Cellular.

Compared with the last quarter, however, the net profit went down by 3.2 per cent, as the second quarter is a seasonally-weak quarter.

“The impact of seasonality between the first and the second quarters is also widening as the proportion of rural subscribers has increased,” said managing director Himanshu Kapania.

According to Kapania, consumers are loosening their purse strings to spend on telecom. “The average revenue per user went up by Rs 16 (to Rs 164) even as minutes of usage per subscriber rose by nine minutes. We are in a much more stable state right now.”

With the number of subscribers using mobile data increasing, mobile data business now contributes to more than half of that by all value-added services (VAS) put together. VAS makes up for 16.1 per cent of total revenues, while mobile data itself contributes 8.7 per cent. The company’s net debt has also came down by Rs 900 crore for the quarter at Rs 9,300 crore.

Idea, however, remains tight-lipped about when it will raise funds through qualified institutional placement. It said it has a one-year window to raise Rs 3,000 crore and its plans will depend on regulatory clarity.

“We plan to raise funds to participate on the spectrum auctions as nine of our licences are coming up for renewal in 2015 and 2016. Until now, there has been no clarity on pricing. The needs for funds will be driven by that,” said Kapania. Idea also said that while it had spoken to some bankers, it is yet to finalise an investment banker for its fund-raising plan.

Kapania sought to down play competition from Mukesh Ambani’s Reliance Jio, which recently acquired a unified licence and can now provide voice services as well, saying new operators had entered in 2008 as well. “It is for them (new entrants) to make the move,” he said.