Idea Cellular Q2 net profit surges, beats estimates

By Devidutta Tripathy and Aradhana Aravindan

NEW DELHI (Reuters) - Idea Cellular Ltd, India's No.3 mobile carrier by revenue, reported a big jump in quarterly profits, underscoring a continued recovery in the sector, helped by fewer competitors and higher call prices.

Idea, part of the Aditya Birla conglomerate, said on Thursday net profit had surged 86 percent year-on-year in its second quarter ended September 30, ahead of analysts' estimates.

However, some key operating metrics such as average revenue per user and voice minutes sold, fell from the previous quarter in a period usually seen as weak for Indian telecoms as frequent power cuts in monsoon rains and network outage hurt traffic.

"With increasing proportion of rural subscribers, the seasonal slowdown in the second quarter has become more pronounced," Idea said in a statement, but added it saw its long-term business trends as "robust".

Bigger carriers such as the Bharti Airtel Ltd , Vodafone Group Plc's local unit and Idea have seen profits improving as they have reduced discounts and raised some call prices in the past two quarters, taking advantage of a court order forcing several smaller players out of the market.

Idea, with its focus only on mobile phone services and the domestic market, is best placed to gain, analysts say. Regulatory uncertainty and legal disputes are the biggest headwinds for Idea and its peers.

India's mobile telecom sector is the world's second-biggest after China by number of customers, but carrier margins are lower than elsewhere and a vicious price war in the last three years has hit profits. Voice calls account for 85 percent of the sector's revenue as high-margin mobile data business is nascent.

Bharti Airtel is the country's No.1 mobile carrier by revenue, followed by Vodafone's unit.

Nine analysts have upgraded their ratings on Idea's stock in the last three months, the most number of upgrades among 90 global phone companies for which Thomson Reuters StarMine compiles data.

Idea, which is a fifth owned by Malaysia's Axiata , said net profit rose to 4.48 billion rupees for the three months to September 30, from 2.4 billion rupees a year earlier. Analysts' average forecast was 4.22 billion rupees.

Revenue rose 19 percent to 63.23 billion rupees for the company, which outpaced bigger rivals in customer sign-ups in the nine months to September.

Average revenue per user, a key metric for carriers, fell 5.7 percent rupees from the previous quarter to 164 rupees, although margin per minute improved to 0.447 rupees from 0.437 rupees.

Ahead of the earnings, Idea shares, valued at $9.4 billion, eased 0.2 percent, in line with the Nifty that was also down 0.2 percent. The results were reported after the market closed.

The stock is up nearly 69 percent this year, compared with a 10 percent gain in Bharti Airtel. Rival Reliance Communications' share price has more than doubled.

(Additional reporting by Tripti Kalro in Bangalore; Editing by Matt Driskill and Pravin Char)