'Idea has no plan to increase tariffs soon'

The Economic Times
30 April 2015

Idea hopes that the decline invoice revenue is at an end, said chief executive Himanshu Kapania after the company reported a 7% d;rop in the segment. He told ET's Deepali Gupta in an interview that, in spite of this, the firm has no plan to raise rates soon and anticipates growth for another 3-4 years in voice from new customers. Edited excerpts:

Voice revenue has fallen for the third quarter. What's your view?
We are hopeful this was the last of the fall. But there is hyper competition in the market. Also, the nature of voice growth is changing. Earlier, our growth came from the profitable circles, but now the volumes are coming from emerging circles where pricing tends to be lower. Growth is coming from UP (East), Bengal, TN.

What you are also seeing in Q4 is impact from before the spectrum auctions. There is a price impact from the auction. ET had mentioned in an analysis that the impact would be of 7-11 paise per minute depending on geography and circle category. We don't intend to pass all that to customers. First, we will see what can be offset by volumes, then absorb some in the voice and data balance, but some will still be left.

You have maintained that voice growth will play out for another three-four years for Idea. Do you still stand by that?
The growth is coming from the un-penetrated areas. So, there is still more traffic that will come and there is opportunity to grow voice from new subscribers over the next three-four years.

Realisation on data revenue per MB has also fallen. You said earlier it is a cause for concern. Will you look at revising rates?
You have to take into account that we are a very small cog in the large wheel that is this industry. The pressures in the January-March quarter were very different from those in the coming quarter.

With the net debt to EBITDA ratio set to cross 4.5 after auction dues, will Idea be forced to let up in emerging circles where you are a price aggressor?
This year, we generated cash profit of Rs 8,000 crore, growing at 25%. We are hopeful that at this rate we will never cross the net debt to EBITDA ratio of 3, which in our industry is among the lowest.

Idea's capex to revenue ratio has largely remained the same over the last three years. With the expected growth in data and corresponding need for infrastructure, does that need to increase?
We spent Rs 3,500 crore in FY14, Rs 4,000 crore in FY15 and have guided for Rs 5,000-5,500 crore this year. For us, this would be sufficient for 2G and 3G growth that we are looking at. As for 4G, we are closely observing its deployment around the world. We have to keep it in mind from the perspective that this is a $3-5 ARPU market. Our offering wilI be driven by handsets and not dongles. So, we think the handset prices must be lower before it can yield returns. 3G handsets have now fallen below the Rs 4,000 mark. Until 4G instruments fall below the Rs 5,000-6,000 mark, we don't feel confident of returns.