Idea tops Street's estimates, reports 28% rise in net profit

Idea Cellular, the flagship mobile company of the Aditya Birla group, reported a 28 per cent year-on-year (y-o-y) increase in net profit in the June quarter to Rs 930.8 crore. This was ahead of the Street's estimates of Rs 911 crore and driven by healthy growth in data and voice volumes. Profits were driven by robust growth in mobile data volumes. Sequentially, however, profits were down 1.16 per cent. The company said it has carefully studied the market for launch of 4G services and is expecting to roll out the upgraded services from January 2016 in 10 circles where it has bought licences.

Both data and voice have driven revenue growth for Idea in the June quarter. The total number of minutes on the network rose 5.8 per cent quarter-on-quarter to 195.8 billion minutes. Mobile data volume grew 15 per cent sequentially to 62.7 million megabytes.

Idea's management said the revenue was impacted to the tune of Rs 317 crore due to reduction of interconnection usage charges (IUC) by the Telecom Regulatory Authority of India (Trai). The lowering of roaming charges by the regulator also impacted the topline. During the first quarter of FY16, Idea's consolidated revenues grew 16.4 per cent y-o-y and 4.5 per cent sequentially to Rs 8,798 crore.

The sequential revenue growth could have been 6.9 per cent excluding the IUC rate cuts, it said. "Implementation of the Trai order on roaming and SMS charge reduction as well as increase in service tax rate effective June 1 from 12.36 per cent to 14 per cent has also impacted the financial results for this quarter," the company said in a statement.

The average revenue per user (Arpu) during the period was Rs 182, a marginal rise from Rs 181 realised in the year-ago quarter, indicating a drop in voice revenue because of IUC rate cut. However, a good 46.7 per cent rise in mobile data volume growth cushioned the fall in average realisation per minute (ARPM) and the net impact was 1.3 per cent decline to 44.5 paise per minute, from 45.1 paise per minute realised in the corresponding period last year.

During the period, the company's earnings before interest, tax, depreciation and amortisation (Ebitda) grew by 28.9 per cent to Rs 3,228 crore and Ebitda margin improved to 36.7 per cent on a y-o-y basis. Margins were also higher than 36.4 per cent in the previous quarter.

To support the infrastructure for the launch of the 4G service, Idea will spend Rs 6,000-6,500 crore in the current financial year for purchase and installation of equipment and technology, up from Rs 5,500 crore it had talked about in the last quarter.

"We believe the time has come to enter the market as the prices of equipment and technology for 4G are reasonable. We will launch 4G services in all 10 circles in a phased manner from 2016 onwards," said Himansu Kapania, managing director of Idea Cellular at a press conference.

The net mobile data customer base has risen in this quarter by 3.7 million (sequentially) to 37.2 million, with 22.9 per cent of overall Idea subscriber base using Idea 2G or 3G platform to access internet. Due to increased competition, the blended data average realisation per MB has fallen 6.5 per cent y-o-y, from 26.3 paise per MB in the first quarter of FY15 to 24.6 paise per MB in the June quarter of this financial year. However, the higher mobile data usage per data customer helped improve the blended mobile data Arpu (2G+3G) to Rs 147 versus Rs 108 in the April-June 2014 quarter.

The 3G subscriber base for the company has grown 90 per cent over the past year, with addition of 7.9 million new 3G data customers, now servicing overall 16.7 million 3G data customers.

Over the past year, 3G data volume led the growth of overall mobile data traffic (2G+3G) by 1.9 times from 32.5 million MB in the first quarter of FY15 to 62.7 million MB in the April-June 2015 quarter.