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Idea Cellular Q2FY12 Call: To Launch Branded Android OS Phones; 3G ICR Revenues; MNP

On Idea Cellular’s earnings conference call for the quarter ended September 30th 2011, Idea MD Himanshu Kapania said thatIdea will participate in the process and actively contribute as a key stakeholder to the New Telecom Policy 2011. He also announced the company’s plans to launch 3G enabled Idea branded Android smartphones to promote 3G data uptake, and discussed details related to 3G Intra Circle Roaming arrangements. Notes from the conference call:

– To Launch Idea branded 3G Android Smartphones:To accelerate 3G adoption, Idea is gearing itself to launch Idea branded high quality Android operating system, full featured Smartphones, which will have all relevant software built in, at affordable price levels. according to Idea, the move will help the market to bring down the prices of Smartphone in the country and make it affordable for the customers to replace their 2G handsets with the 3G handsets, driving 3G data volumes. However, the company clarified that it has no intention to subsidize handsets and take in some costs on account of that, and will achieve low costs by reaching volumes and scale which will make the overall handset manufacturing costs lower.

– On 3G Intra-Circle Roaming (ICR) arrangements:  Kapania clarified that intra circle roaming arrangement is beyond three leading operators and as per legal opinion it is completely compliant on all the  license conditions regarding 3G ICR arrangements. He said that before the 3G auctions took place, the NIA document was released, which had suggested that for operators who finally do not win 3G  spectrum,  their customers can roam under  arrangements of both Inter circle roaming and intra circle roaming and that it was very clearly articulated in the NIA document that the 3G auction was for spectrum and it does not anyway modify the license condition of the operator. He added that Idea’s license specified  that it is technology agnostic and it could choose any technology to be able to use spectrum.

– Revenue from 3G Intra-circle roaming arrangements: The revenue for this quarter includes 3G roaming revenue in provider circles. The 3G intra-circle roaming impact can be seen in Idea’s numbers on revenues, roaming pass-through charges and in the realized rate. According to Kapania, the revenue comes from customers: He said, ” where we are  providing services to our  customers that would go to (our) revenue. Where we have got spectrum and we are providing roaming services that would come into our revenues as roaming revenues. If we are a seeker in a particular circle where we do not have spectrum, we would be incurring costs and what we pay  would be charged as ‘roaming and excess charges’ and that would come as ‘costs.’”

– On Impact of tariff hike: The impact of change in promotional tariffs that the company announced in the last quarter was not discussed and Kapania clarified that migration to newer promotional tariff is a slow drawn process. So its impact will be seen in subsequent quarters.

– 3G Uptake & Towers: The company now has 9,700 3G towers compared with less than 7,000 last quarter. According to Kapania, in terms of 3G customers, Idea has offered the service to over 2.5 million of its existing users but it finds that just over 750,000 of these customers in the month of September have  seriously 3G data services. Hence from future, it plans to move to a stringent definition of 3G data usage subscribers  for subsequent quarters.

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– Higher Average Realized Rate per minute: This quarter, Idea’s ARR was 42.7 paisa per minute against 41 paisa per minute of the last quarter. According to the company, factors supporting improvement in ARR include :
a) VAS contribution up from 12.1% in the last quarter to 13.2%. The 3G data revenue is reported part of the VAS.
b) Higher roaming revenues
c) Small impact due to revision of promotional tariffs for some existing and new customers across few service areas.

– Mobile Number Portability:Idea has extended its mobile number portability leadership with net gain of 1.3 million subscribers as on 16thOctober from other existing operators and claims to maintain the lowest port-out ratio of customers of 61 against every 100 customers ported in.Nearly, 3.3 million customers have ported to Idea.

– Idea-Spice merger dispute: No change in status on Idea’s appeal before the Appellate Division Bench of the Delhi High Court challenging the Single Judge Bench order on 4th July 2011.

Idea Cellular: ARPU At Rs 155; Profit Down 40.3% QoQ

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