Idea Cellular - Margin Beat, Voice Realisation Drops; Result Update Q4FY15 ::Edelweiss

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Idea Cellular (Idea) reported strong Q4FY15 revenue of INR84.2bn (up 5.1% QoQ), led by 8.4%QoQ voice volume growth. Voice realisation however, dipped 4.4% QoQ to INR0.339, due to change in termination charges, persistent competitive intensity and higher growth from low-yield circles, which resulted in lower pricing. EBIDTA margin expanded 210bps QoQ to 36.4% on lower network cost (down 110bps QoQ) and other expenses (down 60bps QoQ). Strong increase in EBITDA resulted in PAT spurting 22.7% QoQ to INR9.4bn. Management commentary on data growth was upbeat and it has guided for FY16 capex of INR50-55bn (excluding spectrum), which is meaningfully higher than FY15 capex of INR40.5bn.

Robust voice volume growth but realisations subdued

Idea logged strong revenue growth though lower by INR1.05bn due to change in termination charges. Like-to-like revenue growth was 6.4% QoQ. Voice realisations were impacted by 160bps due to changes in termination charges for 1 month, though it had negligible impact at EBITDA level. We do not expect voice realisations to improve materially going ahead as competitive intensity is unlikely to subside, with operators continuing to be aggressive in circles where they have low market share.

High capex guidance led by data

The company has guided for non-spectrum capex of INR50-55bn, which is materially higher than actual capex of INR40.5bn for FY15. We believe the telcos are in investment phase as they roll out data network and are likely to step up capex intensity for expanding coverage over next few years. Capex will be mostly led by data and expanding site capacity. Although Idea has set aside spectrum for 4G, it does not want to invest till the ecosystem is ready.

LINK
https://www.edelweiss.in/research/Idea-Cellular--Margin-Beat,-Voice-Realisation-Drops;-Result--Q4FY15/28882.html