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Idea Cellular Q2-11: ARPU Declines 8.2% To Rs. 167; Profit 10.8% Down; VAS Contribution 12.9%

Idea Cellular hasn’t had a good quarter. Not only has the telecom operator been relegated to the sixth position in India’s telecom connections leaderboard, upstaged by Tata Teleservices, it has also reported a massive decline in its Average Revenue Per User (ARPU). For the quarter ended September 30th 2010, Idea Cellular reported an 8.2% decline in its ARPU, which fell Rs. 15 to Rs. 167, from Rs. 182 at the end of the previous sequential quarter. Sequentially, Consolidated Profit declined 10.8% to Rs 179.7 crore. On a brighter note, the contribution of mobile Value Added Services (including P2P SMS)  to Idea Cellular has increased to 12.9% of service revenue, up from 12.6% last quarter, and 10.6% from last year.

Simultaneously, there has been a decline in the average minutes of use per user, even though total minutes of use grew by 3%:

– Subscriber base: 74.2 million, up from 68.9 million Q1-11
– Prepaid subscribers: 96.1% of total, up from 95.9% from Q1-11
– Average Revenue Per User (ARPU): Rs. 167, down from Rs. 182 at the end of Q1-11
– Average Minutes of Use per user (MoU): 394, down from 415 last quarter

– Total Minutes of Use: 84.8 billion, up from 82.3 billion
– Average Realized Rate per minute (ARR): Rs. 0.42, down from Rs. 0.44
– Average cost per minute: Rs. 0.35

In a statement, Idea has reiterated that hyper-competition is pushing down the average realized rate per minute, but the decline is slowing. The company says that newer operators have been “over-active” in acqusition offers, which has led to an erosion in ARR. While this data is a quarter old, it’s worth noting in the chart above that in circles where it is in the top two – except Haryana – Idea Cellular has gained revenue marketshare.

Though financials may not be comparable year on year, due to the amalgamation of Spice Communications into Idea Cellular from March 2010 onwards, consolidated Net Profit for the company declined by 18.4% to Rs. 179.7 crore, from Rs. 220.2 crore, even as consolidated revenues had increased year on year by 23%, to Rs. 3659.2 crore.

A sequential comparison suggests that total revenue was flat (up 0.2%) at Rs. 3659.2 crore. Net profit, as we mentioned earlier, was down 10.8%.  According to the company, July-September is a quarter of subdued seasonal demand, especially with the increasing contribution of rural India to the total subscriber base, and “…other than the seasonality effect, results for Q2 and for the earlier Q1 both display the same trend of an abatement in the rate of price decline, and an improvement of revenue market share for stronger operators like Idea.”

The Net Debt as of September 30, 2010 stands at Rs. 92,512mn and the Net Debt-Equity ratio is 0.79.

Details: Idea Cellular results with quarterly report (Zip)

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