Though Idea grasped management control over Spice on October 16, 2008, it was only in this quarter that Spice was expected to be able to benefit from the synchronising of their IT systems, delivery and call centres. Idea Cellular’s MD Sanjeev Aga said in the earnings call in April (transcript available here) that a dramatic improvement in margins could not be expected as the spend on network expansion in Karnataka, a large circle, would overtake the revenue increase.
Details: Financials | Release | Conference Call
Spice’s revenues only rose 3% to Rs. 3304 million during the quarter. Network operating costs do not reflect massive expansion, instead seem to be reigned in at Rs. 898.70 million from Rs. 1297.20 million, but expenses rose 15.5% to Rs. 3227.30 million. Depreciation and amortisation costs amounted to Rs. 634.80 million for the quarter.
EPS, which had risen to -Rs. 0.3 fell back to -Rs. 0.5 this quarter. License fees showed a marginal increase to Rs. 339.20 million from Rs. 332.70 million last quarter. Was there an expansion?
Note: Spice’s financial year ends in December but they extended the financial year to 15 months last time. Also, though Spice’s financials are merged with Idea’s consolidated report due this week, the numbers may not reconcile due to regrouping and eliminations as part of consolidation, as the company mentioned in its annual earnings call. For example, Spice’s administrative costs are recorded as interest and finance cost as per Idea’s system.
IPO Proceeds Utilisation
Spice has utilised Rs. 3161.2 million from the proceeds of its IPO to pay its long term debts. Akshaya Moondra, CFO at Idea said 41.09% of Spice’s debt has been taken up as Idea’s debt in consolidated terms.
It also used the IPO proceeds to pay Rs. 636 million in fees for its NLD and ILD licenses and has paid Rs. 1659.90 million out of Rs. 1776.30 million to vendors for network equipment and for other capital expenditure. It has a balance of Rs. 117.60 million as ununtilised funds left over.
Spice’s net loss has reduced significantly compared to its Rs. 1364.50 million loss in Q1-08, the quarter ending June 2008. Its revenues have risen 5% compared to Rs. 3143.20 million then. Network operating costs of Rs. 3910.60 million had stifled the company last fiscal, but this is down 77% to Rs. 898.70 million in the quarter ending June 30, 2009.