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Idea Cellular seems to be well on the road to recovery, with its fairly sound performance in the December quarter reinforcing its strengthening footprint as a pan-India player. A marginal increase in ARPU (average revenue per user) too should be heartening, indicative of the peaking out of competitive intensity that ate into the margins of players across the industry over the past 18 months.
Revenues for the quarter increased by 25.6 percent over the same period last fiscal to Rs 3956 crore, while net profits expanded by 42.8 percent to Rs 243 crore.
Sequentially too, revenues and profits have grown at a healthy pace.
Over the past year, the company has steadily moved into newer circles and now has country-wide operations. Despite expanding operations, Idea has managed to keep its operating margins steady at 24 percent levels. While it is expanding margins in its 13 established service areas of operation, it has managed to continuously reduce losses in nine new circles. With lucrative areas such as Mumbai, Tamil Nadu and Kolkata being among the newer geographies, there is sufficient scope for Idea to cut losses in these areas and expand margins further.
Key metrics improve:
After many quarters of falling ARPUs, Idea has witnessed a marginal increase on this front, accompanied by a slight increase in minutes of usage. Realizations per minute have remained steady at around 42 paisa levels, which compares favourably with many top peers. The expansion to newer service areas has also allowed the company to continuously reduce its cost per minute.
The ushering in of mobile number portability would pose a challenge to the company in retaining subscribers. Recent data from Haryana, where it was first introduced suggests a net outflow of subscribers. It remains to be seen if there would be a proportionate loss of revenues subsequently as over the past few years, subscriber growth has outstripped revenue growth for players across the industry.
Idea has a revenue market share of 12.8 percent and would hope for minimum erosion on this front.
Over the next few months the company is set to launch 3G services. This may offer sufficient scope to up realisations as the 11 service areas where it has won spectrum account for 80 percent of its existing revenues and would allow for a focussed customer mining.
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