Idea Cellular announces unaudited results for the second quarter (Q2) and half year ended 30 September 2015

With increasing proportion of rural subscribers, the seasonal slowdown in the second quarter is more pronounced this financial year resulting in sharp contraction on sequential quarterly basis in the ‘Voice Minutes of Use’ by 3.2 per cent to 189.5 billion compared to 195.8 billion minutes in Q1FY16. Further, due to reduction in mobile incoming IUC charges settlement rate from 20p to 14p/min from 01 March 2015, reduction in national roaming call charges and SMS rate between 20-75 per cent effective from 01 May 2015 and pressure on mobile data realised rate as the competition intensifies in mobile broadband, the industry revenue growth rate in first six months of the financial year 2015-16 vs H1FY15 is trending to low 6 per cent - 6.5 per cent against 10.3 per cent growth rate in H1FY15 vs H1FY14.

In comparison, Idea’s long-term business trends remain robust and company is on course of its mission of consistent, competitive, responsible and profitable growth. This quarter Idea standalone revenue has grown by 14.7 per cent on YoY basis (growth of 18.9 per cent post normalisation of IUC settlement) to Rs.86,799 million against Rs.75,673 million in Q2FY15. The primary factor for revenue growth was volume led drivers including

• 26.3 million active subscriber addition in the year
• Expansion of YoY voice minutes @ 16.6 per cent
• Annual 82.6 per cent mobile data (2G+3G) volume growth to 72 billion MB though decline in Voice Realised Rate @ 9.8 per cent YoY (including IUC impact) and mobile data realised rate @ 11.8 per cent, depressed overall revenue growth.

In Q1FY16, the company further strengthened its ‘Revenue Market Share’ to 18.7 per cent (YoY increase of 1.6 per cent) and subscriber VLR market share as on August 2015 to 19.1 per cent, an improvement of 1.3 per cent in last one year. Idea clocked 26.3 million net subscriber VLR addition between October 2014 to September 2015, against 20.9 million addition in the same period previous year, is now serving 170.8 million quality customers and confirming India’s subscriber growth story is intact.

The company was able to contain, on sequential quarterly basis, voice rate decline to only 0.2p/minute, @ 32.7p/minute for Q2FY16 but the blended Mobile Data Average Realisation per MB (ARMB) fell by 1.2p/MB to 23.4p/MB in Q2FY16 from 24.6p/MB (Q1FY16). The non-voice revenue contribution improved to 27.9 per cent this quarter against 21.1 per cent a year earlier.

The net mobile data customer base (2G+3G) has risen by 4.2 million to 41.3 million with 24.8 per cent of overall Idea subscriber base using Idea 2G or 3G platform to access internet. While in last one year 23 million net new subscribers were added but only 10.4 million net existing Idea subscribers upgraded to Idea mobile data service usage. With expansion of Idea own 3G coverage in 12 circles and slated Idea 3G launch in Kolkata metro service area shortly, net new data subscriber addition is expected to accelerate. The higher mobile data usage per data customer @615 MB (447 MB in Q2FY15) helped improve the blended mobile data ARPU to Rs.144 in Q2FY16 (vs Rs.119 in Q2FY15).

Over the last one year, the 3G data subscriber base for the company has grown by 86 per cent with addition of 9.1 million new 3G data customers, now serving 19.6 million 3G data customers. The data ARPU of a 3G data customer is Rs.202 in Q2FY16 in addition to consumer spends on voice and non-data VAS. While mobile data rate has been under pressure (11.8 per cent YoY decline), the faster 3G adoption has led to robust volume growth of overall mobile data traffic (2G+3G) by nearly 1.83 times from 39.4 billion MB in Q2FY15 to 72 billion MB in Q2FY16.

To support this exponential voice and mobile data growth and continue our network coverage expansion, Idea capex spend in Q2FY16 is Rs.17,266 million (excluding interest and exchange rate difference capitalisation), adding 9,947 (2G+3G) sites and ~5,300 km of OFC to reach 100,400 km of fibre spread across the country. Today Idea network spreads to 80 per cent of Indian population at ~965 million for GSM services and ~305 million Indian population on its own spectrum 3G services (excl. Kolkata). The cash profit of Rs.25,318 million for the quarter was sufficient to support the capex spent.

Inspite of higher subscriber addition and network expansion, Idea standalone EBITDA grew on YoY basis by 24 per cent in Q2FY16 and stands at Rs.27,773 million, helping EBITDA margin to improve YoY by 2.4 per cent to 32 per cent. But, due to seasonally weak quarter, the sequential quarterly EBITDA margin declined by 1.7 per cent. The company delivered Rs.7,102 million ‘Profit After Tax’ in comparison to PAT at Rs.6,768 million (excl. Indus dividend of Rs.1,026 million) in Q2FY15.

At consolidated level including 16 per cent of Indus contribution, on YoY basis the gross revenue in Q2FY16 has grown by 14.8 per cent to Rs.86,891 million, the EBITDA at Rs.30,570 million grew by 22.7 per cent, EBITDA margin improved by 2.3 per cent to 35.2 per cent and Q2FY16 PAT stands at Rs.8,093 million.

Having made prudent acquisition for mobile broadband spectrum on 1800 MHz during the last two spectrum auctions in February 2014 and March 2015, Idea is at a path defining juncture in its history as the company prepares to launch its 4G LTE services in 10 service areas. In its initial phase Idea intends to roll out its 4G services across 10 telecom service areas over 750 large and small towns by first half of 2016, including Idea’s leadership markets of Maharashtra and Goa, Andhra Pradesh, Madhya Pradesh and Chhattisgarh, Kerala, Punjab and Haryana and four emerging markets of Karnataka, Orissa, Tamil Nadu and North East. This large built up of mobile data 3G and 4G capacities is being augmented by providing consumers more internet avenues in form of digital services. The company plans to introduce from next financial year, Idea branded digital services applications like Idea Music, Idea Games, Idea Movies, Idea API and Idea Digital Wallets etc. with special focus on regional and vernacular content through planned investments in platforms and partnership in application and content.

Given the large mobile data and rural voice opportunities, Idea with increasing consumer affinity, steady cash flows, deep rural 2G presence, expanding 3G network footprint and planned 4G LTE network launch the company remains confident to further strengthen its market competitive standing and emerge stronger.

Notes:
1. Idea Standalone represents Idea, and its 100 per cent subsidiaries. Effectively, this encompasses all operations, excluding the joint venture i.e. Indus.
2. Idea Consolidated represents Idea Standalone and proportionate consolidation of Indus (@16 per cent).
3. Established Service Areas represent 15 service areas namely Maharashtra and Goa, Gujarat, Andhra Pradesh, Madhya Pradesh and Chhattisgarh, Delhi, Kerala, Haryana, Uttar Pradesh West and Uttaranchal, Uttar Pradesh East, Rajasthan, Himachal Pradesh, Punjab, Karnataka, Mumbai and Bihar service areas.
4. New Service Areas represent seven service areas of Orissa, Tamil Nadu, J&;K, Kolkata, West Bengal, Assam and North East.
5. Cash Profit is calculated as summation of PAT, Depreciation and Amortisation, charge on account of ESOPs and Deferred tax, for relevant period.
6. Figures for past periods have been regrouped, wherever necessary.

About Idea Cellular Limited
Idea Cellular is the third largest wireless operator in India with a revenue market share of 18.7 per cent (Q1FY16). Idea is listed on the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE) in India. Idea is part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla Group is a conglomerate with operations in more than 30 countries. The Aditya Birla Group has a history of over 50 years and has businesses in, among others, mobile telecommunications, metals and mining, cement, carbon black, textiles, garments, chemicals, fertilisers, life insurance and financial services industries.