idea cellular shares overview of telecommunication industry companies

Notably, over the last quarters, Idea has been able to consistently increase the share of value-added services in revenues. In March quarter, the same increased to 12.4 per cent compared to 11.2 per cent in December 2009 quarter. All these put together helped Idea report standalone operating profit margins (adjusted) of 24 per cent, which is marginally (70 basis points) lower than December 2009 quarter, estimate analysts.

The decline in margins, however, is lower than the decline reported by peers like Bharti. The adjustment is consequent to reversal of Rs 60 crore in March quarter and absence of ESOP repricing effects (undertaken in previous quarter) - reported margins were however, higher by 170 basis point rise (sequentially) at 25.2 per cent.
Idea’s profits also got a boost from one-time other income of Rs 52 crore. Overall, Idea’s reported consolidated net profit surged 56.7 per cent sequentially to Rs 266 crore.

Analysts expect the decline in revenue per minute to stabilise as most of the migration to new (lower) tariffs will get complete. Higher network utilisation and lower capex in existing operations will also be positive. However, the final outcome of 3G auction remains pending (and citing the high current bids), analysts are cautious. At Rs 63.45, most of them have a neutral to sell on the stock with price targets ranging Rs 50-65.
source - business standard

Idea Cellular Ltd (updated - 06 May 2010)
In the light of stiff competition in the telecom sector, Idea Cellular’s consolidated results for March 2010 quarter look commendable. Although strictly not comparable, as the results include Spice Communications, which was merged with Idea in March (for January and February months, results account for 41 per cent of Spice’ financials), these were slightly ahead of Street expectations.

Despite high competition leading to tariff cuts, wherein Idea’s revenue per minute slipped from 51 paisa to 47 paisa, the company has been able to expand traffic on its mobile network.

While Idea’s total minutes of use (MoU) were up 13.5 per cent, its per subscriber MoU, which were on a declining trend from a high of 430 in June 2008 quarter to 375 in September 2009 quarter, inched up to 398 in March 2010 quarter. Along with the increase in subscriber base by over six million, Idea saw its standalone revenues rise 7.8 per cent to Rs 3,301 crore in March quarter.

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IDEA Cellular Ltd (updated - 23 July 2010)
IDEA Cellular, the sixth largest telecom operator based on subscriber base, reported lower-than-expected profits and profitability during the June 2010 quarter. A higher-than-anticipated rise in network costs and licensing fees dragged down profits. Also, given the continued decline in its per minute revenue, investors may have to wait for a few more quarters to see some stability in its operations.

To its credit, Idea continued to expand its revenue share — this time by over 2.6% — from just over 8% of aggregate revenue for the sector. The improvement in revenue market share was fuelled by a strong 8% sequential jump in subscriber base. Despite tougher competition from new and existing entrants, the company managed to improve its share of net subscriber additions during the quarter.

The effect of robust subscriber additions on sales was, however, limited to 5.4% sequential growth in sales (after adjusting for consolidation of Spice Communications) since the average realised rate per user per minute (ARR) fell by 6% sequentially.

Though the company reported a sharp 13% jump in network minutes per user (MOU) during the June quarter, average revenue per user (ARPU) continued to slide. This is a concern since falling per user revenue tends to reduce ARR, thereby offsetting the positive effect of higher network minutes on the topline.

In the near term, the company is likely to witness pressure on its ARR though the rate of decline may taper off. This is because mobile tariffs seem to stabilise at the current levels. Another positive is that the contribution of its subsidiary tower company Indus Towers is gradually increasing. It has also turned profitable in the June quarter. This is likely to support the bottomline, going ahead. The company has also kept a close tab on cost efficiencies. Its revenue per employee has increased by 9% in the last one year. Such cost controls cushion margins in times when revenue growth is muted.

At the Thursday’s close of Rs 65.4, Idea’s stock is available at a pre-mium to its bigger peers Bharti Airtel and Reliance Communications. Its enterprise value is nearly 10 times its PBDIT. For its peers, the ratio is close to 7.5. Also, at the current price, Idea’s stock is available at a staggering P/E multiple of 25 compared with a P/E range of 8-12 for peers. Given this and the muted prospects, at least in the near term, Idea’s scrip may witness selling pressure on bourses.
source - business standard

Idea Cellular Ltd (updated - 28 Oct 2010)
A sustained sequential rise in subscriber usage and flattening of rates saw stocks of incumbent telecom operators, including Idea Cellular, rise. The markets felt competitive rate pressures had peaked and the worst was over.

Idea’s September quarter results belie this. The company’s gross telecom revenues were marginally lower at `3,689 crore, despite a 7.7 per cent sequential growth in the subscriber base.

Operating margins contracted around 72 basis points, as operating expenses rose on the back of a 26 per cent increase in staff expenses. Healthy contribution from its subsidiary, Indus Towers (at 16 per cent), pulled up consolidated profit after tax (PAT) to `180 crore (down 11 per cent sequentially).

The five per cent sequential fall in minutes of usage reflected the seasonal impact, but it was higher than what the Street had factored in. Also, the 4.5 per cent fall in the average realised rate of `0.42 per minute was unexpected, given that there were no obvious rate cuts. The management indicated this was due to continued discounts by new operators, underlining there had been no let-up in pricing pressure. The net impact was an 8.2 per cent sequential dip in the average revenue per user to `167.

In addition to `40 crore in the June quarter, Idea capitalised `121 crore 3G debtrelated interest costs in the September quarter. The company is expected to charge interest costs from the fourth quarter of the current financial year after it launches 3G operations and revenues kick in. Given the bleak revenue prospects, analysts see Idea booking an effective loss for acouple of quarters, as mounting 3G-related costs will eliminate pre-tax profits, currently at about `194 crore on a consolidated basis.

However, its potential acquisition-target tag could keep valuations at a premium over the fair value, said analysts. The stock ended 3.3 per cent lower at `67.35 on Wednesday.
source - business standard