Idea Cellular reported its results for Q3-FY2012. Here is a brief excerpt from the same.
- Idea reported ARPU of Rs 159/month, an increase of 2.6% qoq, and MOU increased 1.4% qoq to 401. Idea Cellular now has an enviable Subscriber base of 106 Mn
- VAS as a percentage of revenues was 13.7% up from 13.2% in 2QFY12 and helped to drive the strong non-voice RPM
- Prepaid churn continues to stay at high levels of 10.7%
- Wireless capex for the quarter was Rs9 bn, taking the 9MFY12 capex to Rs33.7 bn
- 3G Update – Idea gained some traction in adding 3G Subscribers with the launch of their 3G Smart phones and having 2.25m active 3G
subs (750k in 2Q) with incremental data ARPU of Rs 79.
Here are some Management Views,
- Idea expects minutes growth to continue going forward as it expects an incremental organic subs growth of c. 200-300 mn in the next few years as the real penetration is lower than SIM reported penetration. Room for expansion in rural areas.
- Room for asset utilization to improve and network costs to decline led by efficiently utilizing assets and continued minutes growth
- Indus revenues (consolidated 16% in Idea’s financials) were up a robust 4.7%.
- Industry over-capacity and no further tariff hike in near term is a Negative
And finally, the most important thing to read from Idea Cellular’s results applicable across the board to all incumbents is the substantial shift of outgoing traffic to lowest cost operators (such as Uninor) in most circles, with incumbents primarily left with incoming traffic. This will be a big negative for incumbents as the Indian Regulator is determined to bring the Mobile Termination Charges to Zero.
Industry analysts say that their are over 100m subscribers who are value seekers and put pressure on the acquisition segment tariffs, causing disruption. However, the remaining 500m active subscribers are stable and base tariff hikes apply to this segment, and should drive growth in realized rates. 55% of Idea’s Subscribers are in stable price category. In addition, management also stated that under the current scenario, further tariff hikes are ruled out. In the new circles where Idea did not raise tariffs last year, the company is still reviewing whether to make tariff changes thus implying RPM flattening out.
Regulatory and Policy concerns still remain on the entire Telecom industry.