Idea Cellular Q3FY14 – Good Performance, But Misses Street Estimates

If we take a look at the performance on the Y-o-Y basis, the bottomline and topline grew 104.6 % and 18.5 %, respectively. The performance was mainly driven by voice and data business. However the profits included Rs 69.6 crore revenues from Indus Towers, wherein Idea holds 16 percent stake.

On QoQ basis consolidated net profit increased to Rs 467.7 crore (from Rs 447.6 crore) and on revenues front it stood at Rs 6,613 crore (from Rs 6,323.3 crore) in the quarter ended December 2013. Here the management stated that “The growing consumer demand and brand affinity, expanding infrastructure and strong cash flows reaffirms company ability to remain on course with its stated mission of consistent, competitive, responsible and profitable growth”. As regards consensus estimates, analysts had expected the company to report net profit of Rs 516 crore on revenues of Rs 6,622 crore.

Management here stated that “The quality of Idea subscribers improved as average revenue per user (ARPU) increased to Rs 169 from Rs 164 Q-o-Q and Rs 158 Y-o-Y and subscriber churn fell by 1.2 percent to 5.6 percent compared to a year ago period”. Apart from that, average revenue per minute rose to 44.9 paise from 44.7 paise quarter-on-quarter while minutes of usage climbed to 376 in the quarter gone by as against 368 in previous quarter.

Total minutes of usage jumped 4.1 percent sequentially to 144.5 billion during December 2013 quarter as against 138.8 billion in September 2013 quarter. The company also stated that consumer preference for brand Idea continued to rise as it added 1.8 crore incremental subscribers (on VLR) in calendar year 2013, now serving 129 million subscribers. Value added services (VAS) contribution increased to 16.1 percent of service revenue from 14.6 percent year-on-year. It was despite steep fall in non data VAS service contribution from 8.9 percent to 6.6 percent during the same period.

Cash profit of the company remained healthy at Rs 1,743.5 crore in Q3FY14, a growth of 7.9 percent compare to Rs 1,616.4 crore in September 2013 quarter. Strong performance on the EBITDA levels has helped the company reduce its net debt levels to Rs 8945 crore which has declined by Rs 341 Crore on Sequential basis and around by Rs 2600 crore from March 2013. This has brought down the Net Debt /EBITDA to 1.23x.

Performance of the company has been good and despite the macro pressure in the sector the company has managed to put in a strong set of numbers. Though the numbers have been good, there are quite a few issues on sector front. Hence we expect the scrip to remain under pressure on the bourses.