Given the prevailing uncertainty in the sector?s regulatory environment and the high depreciation and interest charges on 3G investments, Idea Cellular continued to report declining profits and slow growth during the quarter ended March 31, 2012. It reported a 12.93 per cent decline in its net profit from Rs 2.75 billion for the quarter ended March 31, 2011 to Rs 2.39 billion for the corresponding quarter in 2012. Idea attributes this fall in profit to a one-time charge of around Rs 1.5 billion, which it has set aside as a prudent accounting measure. During the period under review, Idea?s interest costs jumped from Rs 854 million to Rs 2.28 billion, primarily on account of 3G network roll-outs. The total revenues increased by 26.8 per cent from Rs 42.35 billion during the quarter ended March 31, 2011 to Rs 53.69 billion during the quarter under review. The company?s EBITDA increased from Rs 10.75 billion (at 25.4 per cent) to Rs 13.57 billion (at 25.3 per cent). Also, it was able to maintain a free cash flow after taking into account the capex. Given that Idea?s future capex demand from its 2G and 3G businesses will decline, this free cash flow will provide the necessary mitigation of risks arising from regulatory challenges. The total addition to the gross block, including the capital works in progress, stood at Rs 8.4 billion during the quarter under review.

The results are in line with industry estimates that took into consideration the one-off provision and soaring interest costs on Idea?s loans.

On the operational front, the total minutes of usage (MoUs) grew by 22.18 per cent from 101.96 billion minutes during the quarter ended March 31, 2011 to 124.31 billion during the quarter under review. During the same period, the ARPU declined from Rs 161 to Rs 160 and the average MoUs per user declined from 397 to 379 minutes.

The average realisation per minute (ARPM) increased from Re 0.406 to

Re 0.422 during the period under review. However, owing to overcapacity and other competitive challenges, the ARPM earned during the quarter was lower than the Re 0.433 realised during the quarter ended December 31, 2011. This is contrary to the expectation that the call rate hikes announced by the company during mid-2012 would figure in its earnings during this quarter.

Further, the contribution of the non-voice service segment to the company?s total revenues grew significantly, from 12.1 per cent during the quarter ended March 31, 2011 to 14.3 per cent during the corresponding quarter in 2012.

Idea is also going strong with its 3G investment plans. Its services are currently available across 3,000 towns and 10,000 villages in 20 circles (including roaming arrangements) in the country. Of the 113 million wireless subscribers, the operator has around 2.6 million customers on its 3G platform. Further, the company performed well on the mobile number portability front and registered a net gain of 2.9 million customers as on April 22, 2012.

The operator rolled out 2,553 2G cell sites and 1,923 3G cell sites (node B) during the quarter ended March 31, 2012. Currently, Idea has 83,190 2G cell sites and 12,825 3G cell sites across the country. The capex for financial year 2011-12 was earmarked at Rs 36 billion, which has been revised downward to Rs 35 billion for 2012-13 (excluding any spectrum payment). The planned capex will be used to undertake expansion across all segments, including the company?s 3G business.

On an annual basis, the operator has posted a decline of 19.57 per cent in net profits from Rs 8.99 billion during 2010-11 to Rs 7.23 billion during 2011-12. However, the total income during this period increased by 26.05 per cent from Rs 155.03 billion to Rs 195.41 billion. The EBITDA rose by 35.78 per cent from

Rs 33.26 billion (at an EBITDA margin of 21.3 per cent) to Rs 45.16 billion (at 22.9 per cent) during the period under review. The operator?s net debt stood at Rs 119.6 billion as on March 31, 2012.

Going forward

Idea will have seven of its 22 operative licences cancelled when the Supreme Court?s order comes into effect in September 2012. It would need to win back these permits during the upcoming 2G auction in order to retain its pan-Indian presence and compete with other incumbents in the sector. However, with the Telecom Regulatory Authority of India proposing an exorbitantly high base price for spectrum, Idea will have to spend a huge amount of over Rs 25 billion to regain its lost licences. s