Voice, data volume surge help Idea beat estimates

Bouyed by a strong growth in volumes both in voice and data, India’s third largest telecom services player by revenue market share posted 16.2% increase in consolidated revenues to Rs 7,043 crore for the quarter ended March 2014.

On a sequential basis, the company recorded a growth of 6.5%. While voice minutes grew 9.8% y-o-y to 157 billion minutes, data volumes were up 138% year on year to 27.3 billion MBs.

Better revenue performance trickled down to the operating level and the company recorded 33% growth in Ebidta to Rs 2,230 crore. On a sequential basis the growth was 9.6% with margins inching up by 60 bps to 31.1%. The company has done some cost rationalization given that employee expenses are down 10% on a sequential basis.

Better operating performance meant that net profit nearly doubled on y-o-y basis and grew 26% to Rs 589 crore on a consolidated basis. This was despite the doubling of interest costs over the year ago quarter and a 25% increase on a sequential basis. Analysts say that results were slightly ahead of expectations.

For the full year FY14, the company highlighted good subscriber growth, higher realized rate, improved voice volumes as well as contribution from value added services which have helped it achieve improve its performance. While VAS contribution to revenues improved from 120 bps y-o-y to 16.2%, data contribution increased from 5.5% to 8.9%. Margin improvement on a y-o-y basis is due to lower competition leading to a fall in churn to 5% from 7.8% a year earlier.

Given lower churn and a surge in subscriber growth, the management has indicated that promotional expenses going ahead are likely to come down.

After five straight quarters of growth, revenues per minutes on a sequential basis fell 2.8% to 43.6 paise. Attractive promotional tariffs in circles where it is weak has led to the same. The management highlighted that the company is on a weak wicket in some of the circles with low market share and has been experiencing lower volume growth especially in the northern and eastern parts of the country. The management indicated that the metric is likely to improve going ahead.

A telecom analyst with a foreign brokerage said that voice RPM for Idea is at a premium to Bharti and this had to correct. The management post December quarter results had indicated that high RPM was unlikely to sustain going ahead.

Among the key concerns highlighted by the management were the data realized rate which has fallen by 3.5% to 31.1 paise per MB in FY14. Given aggressive promotions and prices the metric deteriorated to 25 paise per MB in the March quarter 2014.