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Idea Cellular Q3 disappoints, stock rebounds from day’s low

NEW DELHI: Idea Cellular Ltd slipped over 2 per cent in early trade on Wednesday, after the Aditya Group-promoted company reported a marginal fall in revenues per minute (RPM) due to drop in non-data value added services.

At 10:00 am, Idea Cellular rebounded from its day’s low of Rs 110.50 and was trading 0.6 per cent higher at Rs 114.20. The stock has hit a high of Rs 114.25 in trade today.

Idea Cellular reported its 3QFY2013 results, which were largely in-line with street estimates on the revenue front, but disappointed on the operating as well as profitability front.

“IDEA’s 3Q volume growth was much higher than our and consensus expectation, but no improvement in ARPM was a negative surprise,” say analysts.

The telecom major reported a smaller-than-expected 14 per cent increase in quarterly profit as higher network operating costs ate into the margins. ET Now had estimated the company to report a 5 per cent sequential rise in its net profit numbers to Rs 252 crore for the quarter ended December 31.

However, the country’s No. 3 mobile carrier by revenue said its consolidated net profit rose to Rs 229 crore for the third quarter ended December 31, from Rs 201 crore reported a year earlier.

On the voice front, average revenue per user (ARPU) rose by 6.7 per cent to Rs 158 during the December quarter sequentially.

In the nine months to December 2012, the company retained its operating margin before depreciation (EBITDA margin) at 26.4 per cent while delivering 15.7 per cent revenue growth.

“The company is expected to maintain the tempo in the coming quarters helped by improving acceptance of data services, and higher proportion of active user base,” ET said.

According to Angel Broking, the company remains surrounded by regulatory uncertainties related to spectrum and license fee payments. The brokerage firm maintains ‘neutral’ view on the stock.

Reacting to the earning report, research firm Kim Eng said that they expect IDEA’s operating performance to improve going forward.

“PER of 28x FY14F is expensive and ignores regulatory risks on account of one-time spectrum fee, spectrum refarming, cut in termination fee and removal of domestic roaming fee,” said Kim Eng in a morning note. The research firm maintains ‘sell’ with a target price of Rs 91.
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