Revenue surged, profit dropped but with improved 'Free Cash Flow', Idea Cellular (FY11-12) is poised to become darling of Telecom Investors!

(Idea Cellular, the 4th ranked telecom operator by market share, today announced its financial results Q4 11-12. The company has shown up the EBITDA improved in Q4-12, as compared to Q3-12. But I always maintained that EBITDA doesn’t show up the exact position of the company financials & should be ignored completely. PBT has swelled, following the reduction in net Interest component. But if you are looking at Idea from investment point of view, then you should look at Cash profits made by company, which has increased by whopping 16{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} on Y-o-Y basis. Idea is good bet for investment despite current negative sentiments in telecom industry .)

Idea, continues its enviable 4 year track record of being the fastest growing Indian mobile operator, with Financial Year 2011-12 gross revenue growth of 25.8{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} against FY11, nearly double the wireless industry growth rate. The 6.7{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} sequential quarterly revenue growth in Q4FY12, on back of 8.8{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} QoQ growth in Q3FY12, reaffirms the increasing consumer preference for brand Idea.

Idea’s global scale of operations, serving 113 million quality subscribers, generating 1.4 billion minutes per day, provides the company a strong hedge to counter the emerging headwinds from the uncertain regulatory interventions and weak macroeconomic environment.

This quarter the high revenue growth is primarily led by the exponential growth in voice minutes @9.1{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} to 124 billion minutes compared to 114 billion minutes in Q3FY12, strengthening Idea’s position among the ‘Top 10 global operators in terms of voice minutes’. The minutes volume expansion again was supported by 6.4 mn VLR subscriber additions during the quarter.

The uptrend of Average Realisation Per Minute (ARPM) was halted with decline in ARPM to 42.2p from 43.3p, a harsh reminder of the market place battle and overcapacity. While challenges on the voice ARPM continue, the company remains focused to improve ‘Non-Voice Revenue’, which contributed 14.3{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} of revenue in Q4FY12 against 13.7{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} in last quarter.

The revenue growth, over the previous quarter, would have naturally translated into EBITDA margin improvement, but for a one-off regulatory impact reflecting in the ‘License and WPC fees’, which has been considered prudently. On annual basis the absolute EBITDA has increased to Rs. 45,159 million @ 22.9{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} in FY12 in comparison to Rs. 33,262 million @ 21.3{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} margin in FY11, a growth of 35.8{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3}.

The standalone PAT for Q4FY12 has improved to Rs. 2,016 million on sequential basis, but the Annual PAT at Rs. 6,036 million was lower compared to Rs. 8,378 million in FY11, primarily on account of higher depreciation and interest charges due to front loaded 3G investments. The company is happy to maintain last quarter trend of Free Cash flow (after Capex). The full year cash profit for FY12 stands at Rs. 36,079 million. With declining future capex demand for 2G and 3G businesses, the Free Cash flow of the company will provide the cushion to tide over the emerging regulatory challenges.

Company’s 3G investment plans are on track and high speed broadband services are now available in 3,000 towns and 10,000 villages, in 20 service areas (including roaming arrangements). The company, in its own way, is accelerating the deployment of 3G ecosystem, by launching Idea branded 3G handsets. Nearly 2.6 million Idea customers are active on company’s 3G platform and enjoying futuristic services.

During the last calendar year, Idea further consolidated its competitive standing to 14.4{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} Revenue Market Share (RMS) in Q3FY12 an improvement of 1.1{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} in RMS from Q3FY11, delivering over 20{af589cdba9d77786c8c861317dbad60bba1e2ebbf56e2ffab874a1b59fde9ce3} incremental share of industry revenue, VLR and Minutes, quarter on quarter.

Idea has extended its overall MNP leadership position with net gain of 2.9 million customers (as on April 22, 2012) from other operators, with one out of every four existing mobile customers, who chooses to port out, preferring Idea services.

The company is confident to overcome the current uncertain regulatory phase, emerge stronger, consolidate its position in the telecom voice market and participate aggressively in the evolving wireless broadband business.

Tags : Aditya Birla GroupIdea CellularIdea Cellular FY11-12. Idea Cellular Financials Results FY11-12