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    Idea Cellular Q3 profit down 17 per cent

    Synopsis

    Idea Cellular has reported a 17% drop in its third quarterly profit due to interests costs from its debt for third generation.

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    MUMBAI: Idea Cellular, India's fourth-largest mobile service provider by subscribers, reported a 17% drop in its third quarterly profit due to interests costs from its debt for third generation, or 3G, airwaves and network expansion. The drop was much lower than the street was expecting.

    Head winds such as fluctuation in the rupee against the dollar, and the company's highly
    leveraged position on account of 3G have led to a sub-optimal return on capital, said the company's chief Himanshu Kapania, on a call with investors.

    Yet, Idea shares ended the day up 3.7% at Rs 87.40 a piece, after it reported October-December net profit of Rs 201 crore compared with Rs 243 crore last year and Rs 106 crore in the preceding quarter.

    An ET poll of brokerages had forecast quarterly profit at Rs 160 crore and revenue of Rs 4,923 crore

    A Goldman Sachs report said, "Idea’s result suggests the minutes bounce back for incumbents in 3Q and no real negative elasticity impact."

    While the Idea management said the company has not seen any fall in usage due to the 20% call rate hike it implemented in July last year, it ruled out any further price rise in the near future.

    The company's consolidated revenue for the quarter was Rs 5,031 from Rs 3,956 crore a year ago.

    Idea is the first among telecom operators to detail earnings, setting the tone for the rest of the industry.

    Operationally, Idea is expected to outstrip competition with the highest rise in minutes used on per subscriber. The company has the largest proportion of rural users, where calling peaks in festive and harvest seasons.

    Average revenue per minute rose to Rs 43.3 from Rs 42.7 during the December quarter for Idea, and average minutes used per customer also rose 1% close in line with analyst expectations.

    "We believe the juice in the voice business still exists. If you look at penetration there are still 250 to 300 million users who are still to join the sector and they will generate minutes," said Mr Kapania.

    In the current year, the company plans to spend Rs 4,000 crore. The company's chief financial officer, Akshay Moondra said the company can fund it through what remains of its operating cash for now. However, if needed the company has credit guarantees of that amount already.

    In the December quarter, Kapania said, realization improved due to higher usage of data services and roaming revenue, not as much rate hikes.

    The quarter marks the first time Idea has generated surplus cash from its business, Kapania said. Adding that the company now has 2.25 million active users on 3G services, which Idea anticipates will grow significantly.

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