Idea Cellular

On the back of 1.37% rise in Average Minutes of usage per user to 369 minutes and 1.41% improvement in Average Realized Rate to 43.3 paisa/minute (against 42.7 paisa/minute in Q2FY12), ARPU increased by 2.58% to Rs 159 which led the consolidated net revenues of Idea cellular up by 9% q-o-q to Rs 5030.82 crore. Total minutes on Network increased by 7.29% to 113.96 billion minutes during the quarter.

OPM improved by 100bps sequentially to 26.7%, mainly due to decline in network operating expenses by 180bps to 22.93% of sales and roaming and access charges by 24bps to 16.81% of sales. The operating profit was thus up 13% sequentially to Rs 1344.59 crore.

Decline in interest costs and relatively lower increase in depreciation charges boosted PBT by 92% to Rs 299.1 crore. The profits were marginally impacted by 65bps jump in tax rate to 32.8% which led NP up by 90% to Rs 200.98 crore.

Idea is the third largest wireless operator in the country with a Revenue Market Share of 14% (TRAI, Q2FY12), is also the fastest growing major operator. In the 13 Established Service Areas, its RMS stands at 18.5% (Q2FY12).

Idea carried 113.9 billion minutes on its network during the quarter and around 1.24 billion minutes on a daily basis and is among the top 10 operators in the world in voice minutes. The company had 106.4 million subscribers at the end of the quarter after an addition of 6.2 million subscribers during the quarter.

Idea continues to lead the industry in term of subscriber quality with over 92.3% of its base on VLR (as per TRAI, November'11). With a net gain of over 2.2 million subscriber (as on 14^th January, 2012), Idea also leads the industry w.r.t. Mobile Number Portability.

ARR increased by 1.41% q-o-q to 43.3 paisa/minute for the third consecutive quarter after eight consecutive quarters of decline and 1.37% rise in Average Minutes of usage per user to 369 and 2.58% increase in ARPU to Rs 159; the consolidated net revenues increased 9% q-o-q to Rs 5030.82 crore.

OPM rose by 100bps sequentially to 26.7%. OPM was aided by decline in network operating by 180bps to 22.93% and roaming and access charges and 24bps to 16.81% of sales and personnel expenses by 41bps q-o-q to 4.82% of sales despite increase in subscriber acquisition, servicing and advertising costs by 105bps to 12.78% of sales and license and WPC charges which rose by 4bps to 11.15% of sales. The losses at EBITDA level from the New Service Areas lowered from Rs 177.6 crore to Rs 172.2 crore. EBITDA of Established Service Areas increased by 12.25% to Rs 1370.8 crore. The operating profit was thus up 13% sequentially to Rs 1344.59 crore.

With 2% fall in interest expense to Rs 288 crore due to Rs 31.3 crore of forex loss in Q2 and muted increase in deprecation expense by 3% to Rs 757.48 crore, along with 65bps higher effective tax rate q-o-q to 32.8% (while the net tax expenses were up by 96% q-o-q to Rs 98.11 crore), the PAT ended 90% up sequentially to Rs 200.98 crore.

On Y-o-Y basis, the revenue was up 27%. OPM improved by 270bps due to lower network operating expenses (219bps decline to 22.93% of sales), personnel expenses by 42bps to 4.82% of sales and license and WPC charges by 30bps to 11.15% and subscriber acquisition costs by 73bps to 12.78% resulting in 42% growth in operating profits. Interest costs increased by 206% and increase in depreciation charges by 28% and tax rate from 7.09% to 32.8% saw the Net profit fell by 17% y-o-y to Rs 200.98 crore.

Segmental Quarterly Performance (Consolidated)

National long distance business which predominantly provides captive connectivity to Mobility services has been merged with Mobility business effective 1^st April 2011. Accordingly, previous period segmental figures have been regrouped.

The revenue from mobility business increased by 9% q-o-q to Rs 4992.4 crore, constituting 92% of the total revenues.

PBIT margin rose by 198bps to 9.81% and PBIT thus grew by 37% to Rs 489.57 crore during the same period.

In Long Distance segment, the revenue stood 4% up q-o-q to Rs 63.73 crore.

PBIT margin fell by 160bps to 6.18% and PBIT thus declined by 18% to Rs 3.94 crore on a q-o-q basis.

In this segment the company has revenue of Rs 348.77 crore (up 4% q-o-q).

PBIT margin improved by 106bps to 26.84% and PBIT by 8% to Rs 93.6 crore as compared to the sequential quarter.

Nine monthly Performance

Company reported increase in revenue by 26% to Rs 14171.47 crore for nine months ended December, 2011. OPM margins increased by 230 bps to 26.4% mainly due to 272bps less network operating expenses at 24.07% as % of revenues despite higher roaming & access charges which increased by 77bps to 6.69% of revenues and price war and entry into new circles where realized rate is lower than overall rate, resultant operating profit increased 38% to Rs 3735.23 crore.

Interest expenditure for the period increased 166% to Rs 828.26 crore and deprecation increased 26% to Rs 2196.96 crore, PBT was up 7% to Rs 710.01 crore. Tax expense taking into consideration of MAT credit increased by 464% from Rs 40.09 crore to Rs 226 crore, (effective tax rate up from 6.04% to 31.83%). Therefore PAT reduced by 22% to Rs 484 crore.

FY2011 performance (Consolidated)

During FY11, the consolidated revenue grew 25% to Rs 15503.22 crore.

OPM however dipped by 290bps to 24.5%, mainly due to higher roaming and access charges (151bps increase to 15.97% of revenue), 61bps increase in license and WPC charges to 11.44% of revenues and 76bps increase in network operating expenses to 25.89% of revenues. The resultant operating profit stood 11% higher at Rs 3790.66 crore.

With nil other income against Rs 31.69 crore, excluding EO income of Rs 51.94 crore, lower interest cost (1% lower at Rs 396.46 crore) but higher depreciation charges (19% higher at Rs 2397.34 crore) and no EO against EO benefit of Rs 51.94 crore led 7% fall in PBT to Rs 996.86 crore and despite 144bps decline in effective tax rate to 9.85%, PAT ended 6% lower at Rs 898.71 crore.

Promoters Holding

As of December 31 2011, promoters holding stood at 45.98% (46% at the end of sequential quarter), FII's increased their holding to 13.43% (11.82% at end of sequential quarter), DII's hold 7.56% (8.72% at end of sequential quarter), and others hold 33.06% (33.46% at end of sequential quarter). The promoters have not pledged any shares as on 31^st December 2011.

Valuation

At about Rs 87.4 (closing price on 23^rd January 2012 at BSE), the stock is trading at 41.62 times annualized consolidated Q3 FY12 EPS of Rs 2.4.

Idea cellular: Consolidated Result

Idea Cellular: Segmental results