Idea Cellular beats forecast, raises capex guidance

Marginally beating analyst expectations, Idea Cellular reported a 3% rise in profit in the three months to March 31, compared with the year-ago period, while revenues grew 26.5% aided by increasing number of subscribers who used more minutes.
Profits rose to `275 crore, while revenues touched `4,235 crore.
India’s fifth largest mobile operator by subscribers, which is part of the $30 billion Aditya Birla Group with interests in metal, cement and retail, reported a near 3% fall in the realised rate per minute to 40.6 paise from 41.8 paise in the earlier quarter.

“Overcapacity in the system has not yet played out, so pricing power is not yet back in the hands of operators,” said Himanshu Kapania, Idea chief executive. “Economic pressure on the loss-making, bottom-end of operators has to be higher before we can expect normalcy to return.”
Idea’s average monthly revenue per user fell to `161, from `185 a year ago.
 

Last month, Bharti Airtel and Reliance Communications reported 31% and 86% fall in profits for the same period, respectively, disappointing analysts whose estimates were higher.
With about 14 carriers operating in different parts of the country, Indian telecom market is among the most competitive ones in the world and has seen tariff rates dropping drastically over the last two years as newer entrants woo subcribers with discounts and low call rates.

Despite the fall in realisation per minute, Kapania said, the company has been able to report growth in revenue primarily because it grew the active subscriber base by 9.6 million during the quarter, which also helped Idea grow its revenue share in the Indian telecom market to 13.6%, making it the third largest operator by that yardstick.

At the end March quarter, Idea Celluar had an active subscriber base of 83.3 million, translating to almost 93.1% of the total number of Idea SIMs in circulation.

For the current fiscal year ending March 31, 2012, company has guided for capital expenditure of `4,000 crore compared with around `3,200 crore in the just concluded year. Part of the capital expenditure would go into increasing the area of coverage for its high-speed third generation or 3G data services.
Idea declined to give a clear indication or estimate of how much revenue it hopes to make in the current fiscal from its 3G services, for which it bought air waves in May 2010 at a high cost of `5,769 crore.
“We are looking at the current  fiscal as an investment phase,” Kapania said. Like other national carriers, Idea does not have 3G spectrum in all the 22 telecom circles in India. Over the last 2-3 quarters, larger operators such as Bharti Airtel and Vodafone Essar have talked of tying up with other national operators for sharing network to have an all-India 3G coverage.

Other than saying that the efforts are still on, Kapania declined to elaborate on why such a tie-up is taking longer to materialise.
Shares of the company lost 0.28% on the Bombay Stock Exchange on Monday when the broader market remained falt. Financial results were announced after trading hours.