Idea’s ARPU increased by 1.4% q-o-q (Bharti’s: down 2.1%) in the recently concluded quarter. According to management, sharp increase in roaming revenues (including int’l roaming) in Mumbai partly contributed to the robust ARPU.
In its new circles, Idea’s ARPU could settle below that of the incumbents. Management attributed the drop in MOU/sub to lack of elasticity (no tariffs cut) and winding down of discounted minutes.
EBITDA margin dipped 39bps q-o-q (+130bps in old circles) due to Rs765 million loss in Mumbai/Bihar circles. The management feels that losses may take a while to peak in Bihar, but was already close to peak in Mumbai.
Network cost-to-sales ratio was up 110bps q-o-q, due to growing reliance on rented sites. Rented sites jumped by 146% y-o-y, as against an 85% increase in the total sites
Idea now expects launch of services in Orissa/Tamil Nadu circles in 1Q/2Q FY10 (earlier 4QFY09/1QFY10) due to, amongst other things, delays in microwave spectrum allocation by government.
The company has received the start-up spectrum in all the remaining six circles and expects to launch services in these circles tentatively by December 2009. According to the management, the entry approach in the new circles will be more ‘measured’.
Idea has transferred 11,100 towers (out of the 17,830 owned by it) to Indus w.e.f. 1 January 2009. It expects an impact of 4-5% on the EBITDA margin (due to rental payments) and 2.0-2.5% on EBIT margin (savings in depreciation cost).
However, after consolidating 16% share of Indus’s profits, the negative impact at net profit level is unlikely to be material, and could be neutral from Yr-2 as per mgmt.
The company has lowered its FY09 capex guidance to Rs65bn (9MFY09 capex was Rs43 billion). For FY10, its guidance is Rs60bn—this includes new circle rollouts but excludes any outlay on 3G.
Including an estimated Rs14 billion net debt on Spice balance sheet, consolidated net debt as of December 2008 was Rs34 billion. Total cash and cash equivalents (including Spice) was Rs81.6 billion ($1.7 billion) as of end 3QFY09.