India’s fifth largest telecom operator Idea Cellular added 5.1 million connections in the June quarter, taking its base to 68.9 million, of which 95.9% are prepaid connections. Average revenue per user has been ground further to Rs. 182 from Rs. 185 in the March quarter and Rs. 232 in June 2009. Idea says that “Hyper-competitive market conditions caused an ~5.4% decline in the Average Realised Rate (ARR) to Rs. 0.44 per minute.”

Post 3G Auction, Debt Rises

During the recently concluded 3G auction, Idea won spectrum in 11 of the 22 circles at Rs. 57,686 million, covering around 80% of Idea’s national revenue. The 3G spectrum footprint covers all circles where Idea says it is number one, two or three in terms of revenue marketshare.

Idea’s net debt has increased by Rs. 45,310 million due to the payment for 3G spectrum, taking it to Rs. 96,569 million. Net worth of the company is at Rs. 116,123 million. In the December quarter, it had a net debt of Rs. 37,460 million.

KPIs

Average minutes of use per user (MoU) has risen to 415 minutes from 398 minutes in the March quarter quite up to expectations.  Total minutes of use have steadfastly risen 13% quarter on quarter to 82, 274 million minutes.

Details: Quarterly Report | Financials | Release

Financials

The sequential drop in EBITDA margins has been explained by the company as due to two primary reasons, both not on the operational side:

  • provision of higher spectrum charges pending the TDSAT judgment, and
  • the impact of the Spice amalgamation for the full quarter.

The contribution of value added services to revenues continues to rise and is now at 12.6%, up from 10.1% in June 2009. Consolidated net profit has reduced by 24.5% sequentially to Rs. 2 billion, and is 32.2% lower than PAT recorded in June 2009. Consolidated EBITDA has slipped back to Rs. 8884 million from Rs. 9235 million in the previous quarter while operational expenses have risen 9.5% sequentially.

Idea’s standalone PAT has fallen to Rs. 1964 million from Rs. 3075 million year on year while EBITDA margins have fallen to 21.5% from 26.7%; PBT is down to Rs. 2010 million. On a standalone basis, Idea reported gross revenue of Rs. 36,897 million for the quarter, an EBITDA of Rs. 7937 million and a profit after tax of Rs. 1964 million

In the past year, Idea has gone from 15 circles to 22 and has set up 18,658 cell sites. The number of Idea connections has risen by 26.1 million. Churn continues to rise – blended churn is now at 8.2%, but this can not be expected to reduce with new telcos adopting motley pricing strategies.

For all our earnings coverage for the quarter, click here.

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