Idea Cellular of telecommunication industry companies

Idea Cellular Ltd (updated - 25 Jan 2012)
The Idea Cellular stock has gained 11% in the last two trading sessions that followed the announcement of its December quarter results. It is expected to see further buoyancy in coming months following signs of revival in the performance of the telecom player that commands the highest proportion of active subscribers among operators.

Its latest results point at the gradual improvement in subscriber statistics which follow a spate of steep falls in tariffs in terms of revenue per minute (ARPM) and revenue per user (ARPU) in the past eight quarters. With intense competition from new entrants and existing operators that switched on to the GSM platform, its ARPU fell 26% and ARPM 24% in the two years to September 2011. This declining trend now seems to have halted if its December quarter performance is an indicator.

Its ARPU rose 2.6% sequentially to Rs 159 per month, the first increase in as many as 14 quarters. Idea has also been reporting a marginal improvement in ARPM in the current fiscal. In the December 2011 quarter, it increased for the third consecutive quarter to 43.3 paise, nearly 7% higher from the low of 40.6 paise in the March 2011 quarter.

These improvements along with a healthy sequential increase of 6.2% in subscriber base resulted in 8.9% sequential revenue growth. On a revenue of Rs 5,065 crore, operating margin before depreciation improved sequentially by 100 basis points to 26.7%.

While the latest numbers look impressive, the big question is whether the company will be able to sustain the uptrend. The task is not easy considering that the management has hinted at continued competitive pressure and the impact of its higher debt burden on the bottomline.

But what should turn in Idea’s favour is the rising proportion of data-driven revenue. The company derived 13.7% revenue from value-added services in the December quarter compared to just 8% four years ago. In addition, though short messaging service (SMS) forms a major chunk of this segment, the management has reported higher use of data services by users. Data-driven VAS is desirable given its high margin potential.

Idea also boasts of 92.3% active users based on the statistics of the Telecom Regulatory Authority of India. This will help in generating higher revenue once it achieves a higher penetration of 3G-related data driven services.
Source - Economic Times

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