Idea net up; MD warns of sectoral ‘bubble’

Idea net up; MD warns of sectoral ‘bubble’
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First Published: Mon, Oct 26 2009. 11 43 PM IST

Warning note: Idea Cellular managing director Sanjeev Aga. Ashesh Shah / Mint
Warning note: Idea Cellular managing director Sanjeev Aga. Ashesh Shah / Mint
Updated: Mon, Oct 26 2009. 11 43 PM IST
Mumbai: Idea Cellular Ltd on Monday announced a Rs220 crore profit for the quarter ended 30 September, a 52% rise over the Rs144 crore in the corresponding period last fiscal year.
Managing director Sanjeev Aga, however, said the price wars—which he described as a “bloodbath”—would cut local call charges, currently at 40 paise a minute, to “unsustainable” levels.
Warning note: Idea Cellular managing director Sanjeev Aga. Ashesh Shah / Mint
Idea Cellular, part of the Aditya Birla Group, added four million subscribers in the quarter, taking its national user base to 52 million, making it the fifth largest firm in the sector by users.
The firm’s shares on the Bombay Stock Exchange fell 3.40% on Monday to Rs56.80, while the benchmark Sensex fell 0.42% to 16,740.50 points.
Aga said the company’s average revenue per user (Arpu) also declined because of overcapacity. “We have stopped looking at Arpu since a year ago because it could get worse,” he said, adding that the sector is showing “all the signs of a bubble”.
“I expect a shake-out, which will be faster than many other people expect,” Aga predicted.
Analysts have also expressed alarm at the fierce price wars, especially since the launch of Tata DoCoMo’s services.
Telecom analyst Shubham Majumder at Macquarie Research, in a 7 October note, downgraded the sector outlook to “underweight”.
“We recommend that investors avoid Indian telecoms as a dynamic game of price positioning plays out over at least the next two to three quarters,” he wrote.
joel.r@livemint.com
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First Published: Mon, Oct 26 2009. 11 43 PM IST