Idea Cellular - Strong Revenue and Margin Performance; Result Update Q3FY15 :: Edelweiss

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Idea Cellular (Idea) reported stellar Q3FY15 revenue of INR80.2bn (up 5.9% QoQ), ahead of Street’s INR79.6bn estimate. Despite high base, voice volumes were strong (up 5.1% QoQ), while voice realisation dipped 1.9% QoQ to INR0.355. EBIDTA margin expanded 140bps QoQ on lower network cost (down 120bps QoQ) and lower employee expenses (down 70bps QoQ). However, PAT increased only 1.5% QoQ to INR7.6bn on INR2.63bn higher depreciation due to change in depreciation policy. We expect Idea to continue to garner revenue market share from stressed operators.

Robust voice volume growth but realisations subdued

Idea reported 5.1% QoQ volume growth taking its minutes volume to 170.7bn minutes, but its voice realisations fell by 1.9% QoQ to INR0.355. The volume growth trajectory for Idea continues to improve and YoY volume growth has increased to 18.1% from 9.4% in Q3FY14. The company continues to garner highest share of subscribers, driving volume growth although this has meant flat or declining voice realisations. Idea’s depreciation was higher by INR 2.63bn due to change in estimated useful life of core wireless assets from 10 to 9 years.

Data growth remains strong; no 4G launch plans yet

Data volume growth, 16.9% QoQ, remains strong while data realisation also improved by 1.5% QoQ. Management commentary on data revenue growth indicated high potential as 3G data usage is still low despite reasonable penetration of 3G handsets. However, Idea would wait before launching 4G network as it would be focusing on 3G network expansion and launch 4G only when sufficient subscribers have 4G handsets.

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https://www.edelweiss.in/research/Idea-Cellular--Strong-Revenue-and-Margin-Performance;-Result-Update-Q3FY15/28147.html