Under the same operating environment as Bharti, Idea saw its Ebitda for the June quarter decline 5 per cent (q-o-q) while revenue growth was up 2.5 per cent. Idea’s revenue-per-minute (RPM) declined 2.5 per cent (q-o-q). Margins as a result took a hit of 2 per cent. New circles are yet to turn Ebitda positive. Even though total volumes carried was up by 5.3 per cent, ARPUs declined by 2.5 per cent while MoU remained flat.
By the company’s own admission, revenue growth could remain under pressure during H1FY13 on account of competitive intensity and implementation of service delivery platform for VAS which could lead to some disruptions.
Idea slowed down its capex in Q1 to `4.1 billion in what many analysts term as company readying for upcoming 2G auctions in November this year.
Consolidated debt declined 5 per cent (q-o-q). Idea has one of the strongest balance sheets in the industry with a consolidated debt-equity ratio of 0.95 and at 2.2 times its Ebitda.
The outlook for Idea remains muted. A highly competitive environment is most likely to cap any upwards pricing in the near-term. What’s more, the August subscriber numbers of industry leaders – Bharti, Vodafone and Idea have reportedly declined for the first time in a decade – a far cry from an industry which at its best saw 20 million additions in a month. And according to industry insiders this trend could continue for the next three to six months as metro users reach saturation.
Following the cancellation of nine of its licences, Idea is especially surrounded by uncertainty. To regain its licences the company will have to bid again. If the company needs to finance spectrum charges, that may put its balance sheet under further strain. At 36 times its earnings, Idea is now more expensive than its 10 year average. Difficult for Idea to break out of its industry constraints.
This article was originally published on November 09, 2012.
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