Telecom News --

Idea Cellular posted a strong Q4, standalone revenue up 21.8%

Mumbai, 03 May, 2010

Idea Cellular announces audited results for FY10 and for the quarter ended March 31, 2010

Idea Cellular posted a strong Q4 to finish yet another year of splendid performance, in the context of exacting sector conditions. The number of operators jumped during the last 15 months, as licenses obtained during the telecom bubble days of 2007, converted into live operations.

The consequent sector over-capacity and hypercompetition caused a year on year decline of 23% in the Average Realised Rate for Idea, while general market rates plunged even deeper. To grab share, new launches offered subscriptions at throw-away prices loaded with free talk time. On the one hand, this led to the use-and-throw phenomenon of new SIM cards. On the other hand, the paid revenue of yesteryear converted to unpaid revenue. Consequently, the national mobility sector revenue growth for the calendar year 2009 contracted to ~12% (after normalization for IUC), compared to the ~22% growth in the earlier year. Conventional matrices like subscribers, ARPU etc became meaningless.

Idea’s results for FY10 are a portent for the sector. In a year characterised by the entry of hungry new operators, it would be expected that the incumbent would cede market share. Counter-intuitively, though not unexpectedly, during the calendar year 2009, Idea infact increased its revenue market share from 11.4% to 12.7% (even in its 11 established service areas, the share increased from 17.5% to 18.8%). Similarly, EBITDA margin even for the established service areas improved by 0.8% to 30.7% from 29.9% compared to the previous year, notwithstanding the punishing 23% drop in ARR. Idea has infact grown EBITDA and PAT compared to the previous year, both on a standalone and consolidated basis, after further absorbing incremental EBITDA losses of Rs. 2,403 mn from the new service areas during FY10

The one-time income, during the quarter, represents the impact of conversion of finance lease into operating lease in the service areas of erstwhile Spice.

Idea’s service area specific strategy, it’s improving capacity utilization, its sophisticated management processes supported by a power brand, underscore Idea’s ability to ride out the rough times, and to emerge competitively enhanced once the phase of overcapacity and hyper competition draws to its inevitable close.

Notes:

1. Idea Standalone represents Idea, and its 100% subsidiaries. Effectively, this encompasses all operations, excluding the JVs, Spice (till February 28, 2010) and Indus. Spice Communications has been merged into Idea Cellular w.e.f. March 01, 2010 and accordingly from that date Idea Standalone includes Spice.

2. Idea Consolidated represents Idea, its 100% subsidiaries, and its JVs, grouped together. In addition to Idea standalone, this covers the proportionate consolidation of Indus (16%), and Spice (41.09%, till February 28, 2010).

3. Standalone pro-forma figures exclude Spice circle results for Mar’10. Consolidated pro-forma figures are derived assuming full quarter consolidation of Spice circles at 41.09%. This is presented for the purpose of comparison with the previous quarter results.

4. Established Service Areas represent Maharashtra & Goa, Gujarat, Andhra Pradesh, Madhya Pradesh & Chhattisgarh, Delhi, Kerala, Haryana, Uttar Pradesh West & Uttaranchal, Uttar Pradesh East, Rajasthan and Himachal Pradesh service area, and also include the service areas of Punjab and Karnataka from March 01, 2010.

5. New Service Areas represent Mumbai, Bihar, Orissa, Tamil Nadu, J&K, Kolkata, West Bengal, Assam and the North East service areas.

6. Cash Profit is calculated as summation of PAT, Depreciation, Charge on account of ESOPs and Deferred tax, for the relevant period.

7. Figures of past periods have been regrouped, wherever necessary

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