Benefiting from higher data service adoption and an increase in voice tariffs, Idea Cellular reported a more than twofold rise in its net profits from Rs 2.29 billion for the quarter ended December 2012 to Rs 4.68 billion in the corresponding quarter in 2013. This was also driven by a 34.85 per cent drop in finance and interest costs from Rs 2.41 billion to Rs 1.57 billion during this period. The company?s net debt declined from Rs 116.82 billion to Rs 89.45 billion. During the quarter ended December 2013, it invested Rs 10.2 billion, which was financed through internal accruals.
The operator?s revenues increased by 18.53 per cent from Rs 55.79 billion for the quarter ended December 2012 to Rs 66.13 billion for the same quarter in 2013. Higher revenues led to improved earnings before interest, taxes, depreciation and amortisation (EBITDA), which increased by 39.51 per cent from Rs 14.73 billion to Rs 20.56 billion during the review period. The EBITDA margin also improved from 26.4 per cent to 31.1 per cent.
Revenues from the voice services business grew by 16.43 per cent from Rs 47.63 billion during October-December 2012 to Rs 55.46 billion during the same period in 2013. This was on account of the tariff hikes and reduction in promotional offers during 2013. Voice ARPUs increased by 6.96 per cent from Rs 158 for the quarter ended December 2012 to Rs 169 for the same quarter in December 2013, largely due to tariff hikes. The operator witnessed higher ARPU despite a 2 per cent year-on-year decline in average minutes of usage per user to 376 minutes during the October-December 2013 quarter.
Idea performed well in the non-voice service segment during the quarter ended December 2013. Its revenues from the non-voice business increased from Rs 8.14 billion during October-December 2012 to Rs 10.64 billion during the same period in 2013. While the share of the non-data value-added service business in service revenues declined from 8.9 per cent for the quarter ended December 2012 to 6.6 per cent for the same quarter in 2013, that of the data services business grew from 5.7 per cent to 9.5 per cent. This was driven by a 17.34 per cent increase in the data subscriber base (2G+3G) from 21.75 million to 25.52 million during the review period. The higher data service uptake can be attributed to 2G data tariff cuts by the operator in June 2013. The operator had slashed 2G data rates by 80 per cent for the Tamil Nadu, Karnataka, Kolkata, West Bengal, Assam, Northeast, Bihar and Odisha circles.
Besides, lower tariffs resulted in higher data usage per customer. The latter grew by 85 per cent from 167 MB for the quarter ended December 2012 to 309 MB for the corresponding quarter in 2013. This led to a 75 per cent improvement in data ARPU from Rs 52 to Rs 91. Meanwhile, 3G services witnessed modest growth during October-December 2013. Though 3G data traffic grew by 109.7 per cent year on year to 9.46 billion MB in the quarter ended December 2013, usage per customer increased by only 10 per cent to 427 MB.
The outlook for Idea Cellular is optimistic in the near term. Higher data service uptake and improved realisations from the voice service business will drive profitability for the operator. However, like other operators, Idea Cellular?s business could be impacted by the entry of Reliance Jio Infocomm Limited, which is planning to introduce aggressive business models in both the voice and data service markets. To remain competitive, Idea would have to augment its service offerings and increase network coverage across the country.
Meanwhile, to finance its spectrum acquisition and expansion plans, the operator has received shareholders? approval to increase the foreign institutional investment limit from 24 per cent to 49 per cent. Idea Cellular has also received approval from the board of directors to raise funds of up to Rs 30 billion through the qualified institutional placement route.
In all, Idea Cellular is expected to continue to perform well on financial and operational parameters, but its future quarterly results would depend on its ability to replicate its past performance in the competitive Indian telecom market.
