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Idea called off Videocon deal to buy 4G spectrum through auctions instead

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Idea Cellular decided not to pursue its 4G  spectrum trading deal with Videocon Telecom as it thought it would be better to acquire spectrum through auctions, Himanshu Kapania, CEO of Idea Cellular told analysts in a call.

“Post our deal announcement the TRAI announced the total quantum of spectrum that will be available and  prices of the spectrum. We realized that it is better for the company to go through the spectrum auction rather than to do the trading as it had been earlier envisaged,” he added.

Idea was supposed to buy 1800 MHz band in two key circles – Maharashtra and Uttar Pradesh (West) – for Rs 3310 crore. However, the agreement was called off by Idea and rival Bharti Airtel acquired spectrum in the 1800 MHz band for Rs 4428 crore across six circles including Bihar, Gujarat, Madhya Pradesh, UP (East) and UP (West), both companies.

Will buy 4G spectrum when needed: Kapania also said that Idea would buy 4G spectrum in tranches as and when the company needs to buy. “They can decide how much quantum they would like to procure. There is no hurry to be able to buy spectrum upfront,” he added.

In April,  TRAI offered an alternative payment structure to reduce any financial burden for 700 Mhz. For the upcoming auctions, telcos could first pay 10% of the bid amount; the balance 90% could be paid over 18 years with 18 equal annual installments, along with interest. The telecom regulator has upheld the it’s pricing of Rs 11,845 crore for a single unit of the 700 MHz band.

The auction of 700 MHz, 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz has been planned to be held in July.

Data tariffs to reduce further by 12%: Idea expects data tariffs to reduce by 12% during the year. “I had mentioned in my opening remark that mobile data tariffs went down between FY15 to FY16 by nearly 12% and I had also mentioned that next year also we expect the mobile data rates to fall at a similar levels. For the last three years the rate has been falling between 8% to 10% on a year-on-year basis,” Kapania mentioned.

Data revenue growth linked to subscriber growth:Idea believes that ARPU (average revenue per user) of data subscriber which is at current blended level of Rs.147 to Rs.150 is unlikely to improve dramatically. “What is going to make a difference is the number of customers added. In FY15 we added about 8 million, FY16 we have added about 11 million and we are very hopeful going forward this number will be much higher,” Kapania added.

***

Financials

For the quarter ended March 2016:

– Net profit fell significantly by 34.88% to Rs 575.6 crore compared to Rs 941.8 crore in the same quarter last year. Idea attributed the fall in net profit to the TRAI’s interconnect charges reduction and lower the upper cap for national roaming, slower uptake of wireless broadband against increase in supply.

– Gross revenue stood at Rs 9,483.9 crore, an increase of 12.6% from Rs 8,422 crore in the same quarter last year.

– EBITDA stood at Rs 3610 crore, an increase of 17.8% from Rs 3064.5 crore.

–  Data as a percentage revenue stood at 20.1% at the end of Q4, down marginally from 20.2% from the preceding quarter. Data as a percentage revenue stood at 16.9% in the same quarter last year.

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