There's still enough juice in voice market: Idea CEO Himanshu Kapania

Kalyan Parbat
Economic Times
21 October 2014

Idea Cellular, India's No. 3 carrier, reported strong second quarter on year growth, driven by strong user additions and continued growth in data usage. Speaking to ET's Kalyan Parbat, Idea Chief Executive Himanshu Kapania said that there is further scope for growth in the voice and data business given the low penetration levels. Speaking on regulatory issues, Kapania urged the government to accept the regulator's proposal of not holding auctions unless a a wider pool of airwaves was available. Edited excerpts:

What drove the results this quarter?
One should see the current results in the context of key growth drivers over the past 12 months. Though Idea added 4.6 million subscribers in the July-September quarter, we added as many as 20.5 million customers between October 1, 2013 and September 30, 2014. On-year minutes of usage (MoU) grew 17% while mobile data volumes grew nearly a whopping 126% year-on-year. The ARPM growth metric is also marginally higher year-on-year.

Idea's 2Q growth has been largely triggered by a data volumes surge, whereas voice revenue growth has been somewhat muted. Is that a concern, going forward?
True, voice rate realisation has been under pressure this quarter, but Idea believes there's still enough juice in the voice market. This is since the industry has added as many as 71.5 million subscribers on a VLR basis in the past one year, which is double the earlier year's levels, I believe there are adequate growth opportunities in the voice spectrum.

What is Idea Cellular's stance on the regulator's proposal that government mustn't rush into spectrum auctions without fixing the supply bottleneck?
We totally agree with Telecom Regulatory Authority's call for boosting spectrum supply before conducting the next auction. It (government) should conduct the next spectrum sale only when it is in a position to put airwaves across 900 MHz, 1800 MHz, 800 MHz and 2100 MHz bands on the auction block. If the supply crunch isn't addressed, it would lead to an auction that isn't equitable and totally unfair, one that would hurt the telecom industry.

Is there enough time for the government to address the spectrum crunch with the Telecom Commission insisting on wrapping up the auction by next February end?
That is precisely why the DoT (department of telecom) must heed Trai's views. And I trust the political leadership cutting across telecom, defence and finance ministries will take a collective decision that is in the interest of the industry.

Morgan Stanley pegs Idea's potential regulatory outflows at Rs 16,700 crore for renewing permits in the nine 900 MHz non-metro circles. Will Idea raise funds to meet future auction costs?
Idea recently raised Rs 3750 crore through its QIP. We've also cut net debt by Rs 2150 crore, making our net debt to Ebitda ratio very compelling at 1.32, which I believe, would enable the company to enter the auctions from a position of strength.

Since Idea needs 900 MHz spectrum to ensure business continuity and doesn't have fallback 1800 MHz airwaves in four out of the nine non-metro circles where its permits will expire, will it bid aggressively for 900 MHz airwaves held by other operators which will also be on the auction block?
As a practice, Idea doesn't disclose its auction strategy.

Should DoT provisionally extend the licences that expire in 2015-16 till such time the government has adequate spectrum across bands to put on the auction block?
Under NTP-1999, the government had committed to a 20-year licence tenure, extendible by 10 years. To the best of my knowledge, all operators whose licences are completing the initial term in 2015-16 have appealed in Supreme Court for this and the next hearing is likely in November.