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Business News/ Companies / Company-results/  Idea net profit rises 69% on data, VAS growth
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Idea net profit rises 69% on data, VAS growth

Telecom firm posts Rs756 crore net profit for September quarter; revenue increases 20% to Rs7,569 crore

On Monday, Idea shares rose 4.61% to Rs160.15 on BSE, while the exchange’s benchmark Sensex gained 1.23% to 26,429.85 points.Premium
On Monday, Idea shares rose 4.61% to Rs160.15 on BSE, while the exchange’s benchmark Sensex gained 1.23% to 26,429.85 points.

Mumbai: Idea Cellular Ltd, India’s third largest mobile phone services provider by revenue and market share, beat analysts’ profit and sales estimates for the September quarter, led by revenue growth from mobile data and value-added services (VAS).

Net profit rose 69% to 756 crore during the three months ended 30 September from 447 crore a year ago, the Aditya Birla Group company said on Monday. Revenue rose 20% to 7,569 crore.

A Bloomberg poll of 22 analysts had pegged consolidated net profit at 673.1 crore and net sales at 7,439.7 crore.

Himanshu Kapania, managing director of Idea Cellular, attributed the “healthy growth in profit and revenue" to growth in subscribers, growth in minutes, and mobile data demand, helping the company reverse “the two-year trend of a sequential revenue decline".

Revenue from mobile data increased 22.5%, contributing 14% to service revenue, while VAS accounted for 21.1% of overall revenue in the second quarter.

Idea Cellular’s average revenue per user (Arpu) increased to 176 from 164 in the year ago. The telecom service provider’s average realization per minute (Arpm) too was higher at 45.9 paise in the September quarter, compared with 45.1 paise in the previous quarter.

During the quarter, the company carried 162.5 billion minutes on its network.

Mobile data volume grew to 39.4 billion megabytes (MB) on its 2G (second generation) and 3G (third generation) platforms, a 21.3% increase over the previous quarter. Average realization per MB (ARMB) for the reporting quarter was at 26.5 paisa, compared to 26.3 paisa in the previous quarter.

Idea’s stand-alone earnings before interest, tax, depreciation and amortization—an indicator of operating profitability—was at 2,239 crore, a 29.5% rise over a year ago, on the back of better cost management, robust net subscriber addition, voice minutes and data volume growth.

The company’s recent equity infusion by way of a qualified institutional placement and the share sale to Axiata Investments 2 (India) Ltd, and operational efficiencies have helped the company lower its debt to 11,826 crore, said Akshaya Moondra, chief financial officer.

Moondra added that the company was “well prepared" to participate in the telecom auctions.

The auction participation will need another 10,000 crore at least in capital expenditure, he added. This will mostly be funded by debt, Moondra said.

In April, the company said it will spend 3,500 crore in the 2015 fiscal year. However, analysts do not expect the company to increase its capital expenditure on 3G services.

According to a 26 September report by Elara Capital, the Idea management has no plans to increase 3G capital expenditure because of its weak smartphone ecosystem.

“Thus, management will map capex intensity to data growth expectation. It further says there is very little possibility of increasing existing capex guidance of 3,500 crore per year, due to 35-40% 3G coverage with less than 20% capacity utilization," the report added.

According to Dhananjay Sinha, head of research and strategist at Emkay Global Financial Services, Idea has done better thanks to data usage growth.

“As long as their data growth continues to improve, they should be able to do fine," he said.

Sinha said the rising debt due to the auction is inherent for the industry so it is not a cause of concern for the company.

The results were declared after market hours.

On Monday, Idea shares rose 4.61% to 161.05 on BSE, while the exchange’s benchmark Sensex gained 1.23% to 26,429.85 points. In the September quarter, the Idea stock rose 25.4%, while the Sensex gained 4.8%.

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Published: 20 Oct 2014, 06:10 PM IST
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