Idea Cellular

With continuous growth in Minutes on Network in third consecutive quarter (13% Q-o-Q increase) and 5.4% drop in Average Realised Rate to Rs 0.44/minute, the consolidated net revenue of Idea cellular for Q1 FY11 increased 9% Q-o-Q to Rs 3653.70 crore. On Y-o-Y the revenue was up 23%. However, it is to be noted that Q1 FY11 results are not directly comparable with previous quarters, as 100% of Spice was consolidated with Idea this quarter, as against 41% in previous quarters. The OPM was down by 150 bps sequentially to 24.3%. The drop in OPM was driven by Spice amalgamation and a provision for higher spectrum charges. However, lower spending on promotions (240 bps lower Q-o-Q) prevented deeper decline. The operating profit was up 3% sequentially to Rs 888.38 crore.

With flat interest income and depreciation charges and Nil EO against Rs 111.94 crore in Q4 FY10 along with 610 bps lower effective tax rate on Q-o-Q at 3.5% (while the net tax expenses were lower 74% Q-o-Q at Rs 7.25 crore), the PAT ended 24% lower sequentially and 32% lower Y-o-Y at Rs 201.40 crore. This is to be noted that the reported PAT in Q4 FY10 was higher due to EO.

However, a surge in promotional expense appears very likely from Q3 FY11 onwards because of the 3G rollout. Furthermore, little network expansion in the latest quarter resulted in savings on depreciation and network costs. Moreover, the company capitalised interest costs related to 3G spectrum fees, and there would be an additional burden of spectrum fee amortization from Q3 FY11 onwards.

With continuous growth in Minutes on Network in third consecutive quarter (13% Q-o-Q increase) and 5.4% drop in Average Realised Rate to Rs 0.44/minute, the consolidated net revenue for Q1 FY11 increased 9% Q-o-Q to Rs 3653.70 crore. On Y-o-Y the revenue was up 23%. However, it is to be noted that Q1 FY11 results are not directly comparable with previous quarters, as 100% of Spice was consolidated with Idea this quarter, as against 41% in previous quarters. The standalone revenue of Idea was up 12% sequentially to Rs 3690 crore.

The OPM was down by 150 bps sequentially to 24.3%. The drop in OPM was driven by Spice amalgamation and a provision of higher spectrum charges. However, lower spending on promotions (240 bps lower Q-o-Q) prevented from deeper decline. The operating profit was up 3% sequentially to Rs 888.38 crore. With flat interest income and depreciation charges and Nil EO against Rs 111.94 crore in Q4 FY10 (related to reversal of Rs 60 crore and one time income of Rs 51.94 crore representing the impact of conversion of finance lease into operating lease in the service areas of erstwhile Spice Communication), along with 610 bps lower effective tax rate on Q-o-Q at 3.5% (while the net tax expenses were lower 74% Q-o-Q at Rs 7.25 crore), the PAT ended 24% lower sequentially and 32% lower Y-o-Y at Rs 201.40 crore.

Segmental Performance for the quarter ended June 2010 (Consolidated)

Idea Cellular had 68.9 million subscribers (including that of Spice) at the end of June 2010 with an addition of 5.1 million subscribers during the quarter (against 6.2 million in sequential quarter).

The revenue from mobility business was up 10% Q-o-Q at Rs 3654 crore, constituting 84% of the total revenue. PBIT for the quarter was however down 41% Q-o-Q to Rs 94.81 crore. The PBIT margin dipped 230 bps to 2.6% sequentially.

In Long Distance segment the revenue for Q1 FY11 stood 6% higher sequentially to Rs 440.33 crore while the PBIT was up 13% Q-o-Q to Rs 187.68 crore. The PBIT margin also improved from 40.1% to 42.6% sequentially.

Passive Infrastructure

In this segment the company has revenue of Rs 279 crore (8% up Q-o-Q) while the PBIT increased by 39% Q-o-Q to 40.31 crore. The PBIT margin improved by 330 bps to 14.4%.

Consolidated performance for the year ended March 2010

For FY10, the consolidated revenue increased 23% Y-o-Y to Rs 12447 crore. The OPM however dipped 50 bps to 27.4%, mainly due to higher network operating cost (440 bps increase to 25.1% of revenue) which was largely compensated by 370 bps drop in roaming & access charges to 14.5% of revenue, as the company is increasingly using its captive network for carrying long distance traffic. The resultant operating profit stood 20% higher at Rs 3407 crore.

With other income at Rs 31.69 crore, excluding EO of Rs 51.94 crore (Nil in FY09), lower interest cost (19% lower at Rs 400.52 crore) but higher depreciation charges (44% higher Y-o-Y at Rs 2015 crore) and 111% higher tax expenses at Rs 121.41 crore (effective tax rate increased by 520 bps to 11.3%), the PAT ended 8% higher at Rs 953.94 crore.

Other recent Developments

In the recently concluded auction for 3G Spectrum, the company successfully bid for 11 service areas, viz. Maharashtra, Gujarat, Andhra Pradesh, Kerala, Punjab, Haryana, Uttar Pradesh (E), Uttar Pradesh (W), Madhya Pradesh, Himachal Pradesh and Jammu & Kashmir at a total cost of Rs 5768.59 crore. This amount was paid on 31^st May 2010.

Promoters Holding

As of 30^th June 2010, promoters holding remained almost same at 46.98% (46.99% at the end of sequential quarter), foreign investors reduced their holding to 40.08% (41.42% at end of sequential quarter), MFs, Banks and other institutions hold 7.71% (7.52% at end of sequential quarter), and others hold 5.23% (4.08% at end of sequential quarter). The promoters have not pledged any shares as on 30^th June 2010.

At about Rs 65 (LTP on 22^nd July 2010 at BSE), the stock is trading at 26.6 times annualized consolidated Q1 FY11 EPS of Rs 2.4.

 Idea cellular: Consolidated Result

 Idea Cellular: Consolidated Segments