Idea Cellular announces audited results for the fourth quarter (Q4) and financial year ended 31 March 2016

Highlights – Q4 FY16

INR mn

After six quarters of steep fall in voice and mobile data realised rate, Idea by clamping down on promotional offers in Q4FY16 for new and existing customers, is pleased to share voice realised rate improved by 4.4 per cent from 31.8 p/min in Q3FY16 to 33.3 p/min and mobile data realised rate improved from 22.3 p/MB to 22.9 p/MB, QoQ increase of 2.9 per cent.

With reduced consumer promotions this quarter, the subscriber and volume growth was slower as only 1.9 million net quarterly subscriber addition, customer EoP base of 183.8 million (on VLR, 31 March 2016); QoQ voice minutes growth @ 1.2 per cent to 201.6 billion minutes and net mobile data volume (2G+3G+4G) QoQ growth @ 1.5 per cent to 82.2 billion MB. Inspite of slow volume growth, the sequential quarterly revenue growth is robust @ 5.2 per cent. The improved revenue growth led by better rate realisation helped Idea deliver strong 16.4 per cent sequential quarterly EBITDA growth at Rs.33,199 million for Q4FY16 and QoQ EBITDA margin improvement of 3.4 per cent, from 31.6 per cent in Q3FY16 to 35 per cent.

On the financial year basis, Idea continues its enviable track record of being amongst the fastest growing large Indian mobile operator for eight straight year with 14.0 per cent annual revenue growth in FY16 at Rs.359,671 million (normalised revenue growth of 17.8 per cent after adjusting for change in IUC), against Rs.315,548 million in FY15 (19.1 per cent vs FY14). Idea revenue growth is likely to be over two times the mobile industry revenue growth, estimated at low level of 5.5 per cent to 6 per cent in FY16, against industry FY15 over FY14 growth of 10.8 per cent. Primary reasons for lower mobile industry growth in FY16 are TRAI directed d;rop in mobile IUC settlement charge from 20 p/min to 14 p/min effective 1 March 2015; reduction in upper cap for national roaming and SMS charges; intense battle for new subscribers in voice segment and slower new customer uptake for wireless broadband against colossal supply increase both, by existing 3G operators expanding coverage and launch of new 3G and 4G markets from spectrum acquired by telecom licensees in auction of 2014 and 2015.

The factors driving Idea ahead of industry revenue growth in FY16 over FY15 were volume led including 22.4 million VLR subscribers addition in the year; voice minutes annual growth @ 15 per cent to 786 billion minutes and mobile data volume (2G+3G+4G) yearly expansion @ 72.7 per cent to 298 billion MB. However, inspite Q4 vs Q3FY16 realised rate improvement, FY16 overall price realisation vs FY15 declined in voice @ 8.3 per cent (including IUC impact) and mobile data rate decline @ 11.8 per cent, depressing Idea overall annual revenue growth.

Competitively, the company continues to improve its Revenue Market Share (RMS) expanding it to 18.9 per cent (Q3FY16), an improvement of 1.4 per cent compared to Q3FY15 and subscriber market share (VLR) to 19.7 per cent (February 2016), an improvement of 1.1 per cent in last one year.

On 23 December 2015, company took the historic giant leap in its telecom journey with launch of its 4G LTE services. In the last 100 days, Idea has moved fast, introducing 4G services for 3,946 towns and villages in 10 service areas (Maharashtra and Goa, Andhra Pradesh, Madhya Pradesh and Chhattisgarh, Kerala, Haryana, Punjab, Karnataka, Orissa, NESA and Tamil Nadu including Chennai); covering 116 million Indians; 21 per cent of overall population in these 10 circles. As of 31 March 2016, over 680,000 customers are actively using the Idea 4G services. The company has built massive high speed wireless broadband (3G+4G) capacity in short span of time, a clear testimony of its ability to compete.

Besides 4G, during the year Idea continued its 3G expansion and its 3G data volume exploded by nearly 2.1 times from 91.2 billion MB in FY15 to 188.8 billion MB in FY16. In addition to launch of new 3G services in Kolkata service area in Q3FY16, Idea introduced 3G 2nd carrier on 900 MHz in Maharashtra and Madhya Pradesh in Q4FY16, extending its 3G 900 MHz services to three circles (including Delhi Metro).

The company added 8.4 million new 3G users in last one year, now serving overall 22.9 million 3G data customers, though still a low penetration of 13.1 per cent of EoP Subscribers. Presently, 60.4 million (annual increase of 23.9 million) of Idea’s strong 175 million EoP subscribers have upgraded their phone to 3G/4G smartphone including 11.1 million 4G smartphone owners (6.3 per cent of its EoP). The overall Idea mobile data user (2G+3G+4G) penetration is now @ 25.1 per cent (of EoP); 44 million data subscribers with blended mobile data ARPU (2G+3G+4G) at Rs.147 in Q4FY16 (vs Rs.150 in Q4FY15). The mobile data revenue is now contributing 20.1 per cent of service revenue and non voice revenue contribution has increased to 28.3 per cent (vs 24.5 per cent in Q4FY15).

In FY16, Idea has more than doubled its past three years average capex spends with network investment of Rs.77.7 billion. During the year, the company integrated highest ever 48,878 sites (14,466 2G Sites, 19,769 3G sites and 14,643 4G sites) reaching a total of 191,536 sites, fully funded from cash profit of Rs.101,201 million. Idea also expanded its fibre coverage by doubling its annual rollout to 22,100 KM (vs 11,400 KM in FY15), reaching 115,500 KM of OFC presence. With exponential network coverage and capacity expansion in FY16, Idea GSM coverage has reached nearly 1 billion Indian spread over more than 390,000+ towns and villages. Wireless broadband coverage has expanded to 388 million Indian across 17 circles, covering 61,975 towns and villages. Idea’s own 3G spectrum in 13 service areas today covers 50 per cent of these circles population.

Inspite of higher network expansion and multiple inflationary and regulatory pressures, Idea FY16 standalone EBITDA grew by 21.9 per cent and stands at Rs.119,098 million, helping EBITDA margin improve by 2.2 per cent from 31 per cent in FY15 to 33.1 per cent.

The increase in ‘Depreciation &Amortisation’ charge to Rs.62,321 million and ‘Interest &Finance Cost (net)’ of Rs. 15,764 million during FY16 reflects additional charges on account of renewal of existing licenses in seven established circles w.e.f. Dec 2015, launch of 4G services in 10 circles from Dec 2015, introduction of 3G 2nd carrier 900 MHz in two circles during Q4FY16 and launch of 3G services in Kolkata metro during Q3FY16.

Therefore, inspite of strong EBITDA growth, Idea Standalone ‘Profit After Tax’ for FY16 stands at Rs.26,766 million against Rs. 28,522 million in FY15 (excluding Indus Dividend). However, the annual cash profit of Rs.101,201 million for FY16 grew by 19.3 per cent (vs Rs.84,820 million in FY15). The net debt as on 31 March 2016 stands at Rs.387.5 billion, including all deferred payment liability from auctions. The net debt to annualised Q4FY16 EBITDA stands at 2.92 times.

During the quarter, Idea and Videocon jointly decided to terminate the agreement for ‘Transfer of Right to Use 1800 MHz spectrum’, with no liability. At consolidated level including 16 per cent Indus contribution, Idea gross revenue in Q4FY16 has grown by 12.6 per cent on YoY basis to Rs.94,839 million, the EBITDA at Rs.36,160 million grew by 18 per cent, EBITDA margin improved by 1.7 per cent to 38.1 per cent and this quarter PAT stands at Rs.5,756 million. With consistent performance, the board of Idea is pleased to recommend dividend @ 6 per cent, an overall payment of Rs.2,600 million (including dividend distribution tax).

FY16 results once again demonstrate, Idea is on course of its stated mission of consistent, competitive, responsible and profitable growth. The ever improving brand affinity, accelerated pan India infrastructure expansion and strong cash flows are lead indicators of Idea’s ability to meet all volatile, uncertain, complex and ambiguous developments. Company remains nimble, agile, adaptable and confident to capitalise all emerging opportunities in mobile voice and data market.

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, Utt ar 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 &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 18.9 per cent (Q3FY16). 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.