Idea Cellular, the country’s third-largest telecom operator by users and revenue, will need about ₹10,000 crore to participate in the upcoming February 2015 spectrum auction. For the GSM operator, this is not a cause for worry as it expects the Government to come up with deferred payment clauses, similar to those in the previous auction.

Further, with reduced debt, the Aditya Birla group company now has sufficient headroom to fund its licence renewal — seven of its circles are coming up for renewal by December 2015 and two by March 2016. In a tête-à-tête with BusinessLine , Idea Cellular Managing Director Himanshu Kapania spoke about this and other issues. Edited excerpts:

What is your view on TRAI’s proposal that the Government should address spectrum constraints before auctioning spectrum?

TRAI’s key recommendation is to exercise caution as the telecom sector is at a critical juncture and the spectrum available for the February 2015 auction is limited to licences expiring in 2015-16. It has also recommended deferring the auction till the supply constraint is resolved. We agree with TRAI’s recommendations, especially on increasing the quantum of supply in the 900 MHz band by releasing 1.2 MHz from BSNL. There were suggestions also on harmonising 1800 MHz spectrum and releasing 2x60 MHz of the 2100MHz spectrum band for 3G. We are awaiting the Department of Telecommunications’ view on all these.

To participate in the upcoming auctions, Idea Cellular will require about ₹10,000 crore against the minimum reserve bid price. How are you planning to raise this?

In the previous auction, the Government had offered the benefit of deferred payment and we are hopeful it will come up with similar payment options this time too. We recently raised about ₹3,750 crore through a qualified institutional placement and preferential issuance of shares. Last quarter (ended September), through a combination of preferential equity induction and cash profit of ₹1,800 crore, we managed to reduce net debt by ₹2,150 crore. Our current net debt to annualised EBITDA ratio is 1.32, providing us sufficient headroom to participate in the forthcoming auction.

Even though over-the-top (OTT) applications such as WhatsApp and Skype are yet to make an impact on operators’ voice revenues, are they cannibalising SMS revenues?

The OTT players are affecting our revenues on messaging to a certain extent. But looking at our overall 143 million subscriber base … while a large number of SMS users are moving into OTT applications, a similar quantum is sending SMSes for the first time. So, it’s being compensated.

How do you see mobile data growing for Idea Cellular?

The biggest contributor to non-voice revenue is mobile data. As a percentage of revenue, it has improved by 5.3 per cent in the last one year. Mobile data volume has also exploded (126 per cent growth on a year-on-year basis and 21 per cent on a sequential quarter basis). We are optimistic that this trend will continue.

Now, only 30 million out of our total 143 million subscriber base currently access Internet on their devices, and with user growth, the percentage of Internet users is also expected to grow. Customers are also upgrading to 3G from 2G services.

You have always maintained that Idea Cellular will wait for 4G to evolve in the country….

Currently, we are focused on expanding 3G services and carefully evaluating the evolution of the 4G ecosystem as we seek allocation of 1800 MHz spectrum. We will continue to evaluate the consumer demand for data services and adoption of 4G devices before taking a call.

What are your plans for 3G as you are betting big on non-voice revenues?

During the last one year, Idea Cellular has added 7,700 sites on 3G. In the last quarter, we expanded our services to Punjab and now we have 11 circles covering nearly 73 per cent of our subscriber base from our rollout.

Will the next phase of subscriber additions come in from the rural sector? What are your plans?

In the last one year, we expanded our GSM sites by over 11,000. Idea Cellular’s coverage has now extended to over 3.5-lakh villages, with nearly 40,000 added over the last one year. The company has added more than 20.5 million users during this period, with the majority of them from rural areas.

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