 "Idea net doubles, RCom sees margins inch up")
This profit growth came on the back of 18.8% increase in revenues to Rs 6,538.8 crore as compared to Rs 5,503 crore in the corresponding quarter last year. 'Apart from volume growth, better cost management, improvement in margins and higher contribution by value-added services which increased to 16% from 15.2% in the last quarter, contributed to profit growth,' said Himanshu Kapania, managing director of Idea Cellular.
He also attributed the net profit growth to higher revenue growth and improvement in the average revenue per minute (ARPM). The higher ARPM which is a blended rate (voice and data) was up 6% year-on-year (up 2.5 paise compared to March quarter) to 43.7 paise. The last time the company hit the 43 paise mark was seven quarters ago in the December quarter of FY12. Voice business margins were up as the company extended its programme to stop free and promotional minutes for new customers (started in the March quarter) to existing customers in the June quarter. On the data front, the company saw a jump in volume growth with mobile data contributing 7.2% of service revenues.
Data subscriber increases and the corresponding data revenues too added to the performance of the company. It added 4.7 million data customers in the June 2013 quarter, taking its data subscriber base to 30.9 million, including 5.5 million 3G customers.
'The data average revenue per user (ARPU) for 3G is at Rs 110 while that of 2G is at Rs 54. The 3G ARPU improved by Rs 20 in the last one year. Though there were changes in headline tariffs (of 3G) the company was able to retain same level of realised rate,' said Kapania.
The company is planning to raise funds to the tune of Rs 3,750 crore which will be a combination of a qualified institutional placement as well as well as preferential issue of share to Axiata, its largest non-promoter shareholder. While the pricing and quantum of share is not known analysts peg the equity dilution at 8% if Rs 170 per share is taken as the issue price.
Reliance Communications which also posted its results today also bucked the trend in positive signs in the telecom sector as its margins i,e revenue per minute increased increased four% to 45.7 paisa over the last quarter. However, it reported a 33% fall in its net profit to Rs 108 crore, mainly due to an increase of 24% in finance costs to Rs 687 crore.
On Wednesday, Bharti Airtel also showed an improvement in its ARPU by two%. This comes after telecom operators started showing trends of falling margins after tariff wars in 2010. Post reduction in competition in the sector, these companies have only been showing stable margins.
'We have done two rounds of price initiatives, a headline tariff increase last October and cutting free minutes in April, and the benefits are beginning to show,' said Gurdeep Singh Sandhu, chief executive officer of Reliance Communications. He said that the GSM business of the dual-technology operator and data business contributes 67% of the total revenues and are the growth drivers.
Cost optimisation measures that the company undertook as well as reduction in manpower by outsourcing network management also aided also helped the EBIDTA--earnings before interest, depreciation, tax and amortisation which grew by 6.6% to about Rs 1,701 crore.
The total income of the company however grew by just 1.7% to Rs 5,412 crore, as compared to Rs 5,319 crore in the same quarter last year.
RCom claims that its focus is now on paid and profitable minutes in line with the industry, which it says is moving towards stabile pricing. 'The telecom sector is now in a mature and stable phase,' said Singh. The operator said that its data subscribers are at 31.1 million, constituting 25% of its base. Its 3G subscribers, which are included in data segment, are at 7.7 million.