Q1 Results: One-Off Gain Helps Idea Cellular Report Profit

Idea Cellular Ltd. reported a profit for the quarter ended June, aided by the sale of its tower arm.

The telecom operator’s net profit stood at Rs 256.5 crore compared with a Rs 962.2-crore loss in the previous quarter, according to its exchange filing. The loss would have widened without the one-time gain of Rs 3,364.5 crore from the sale of Idea Celullar Infrastructure Services Ltd. to American Tower Corporation. Analysts tracked by BloombergQuint expected a loss of Rs 1,515 crore.

Its average revenue per user declined to a record-low of Rs 100 amid fierce competition triggered by Reliance Jio Infocomm Ltd. in the world’s second-largest telecom market. The Indian mobile industry continued to decline under from heavily discounted unlimited voice and bundled data plans and subsidised 4G phone offerings from one of the operators, Idea Cellular said in a statement.

• Revenue declined 3 percent over the previous quarter to Rs 5,889.2 crore.
• Operating profit slumped 54 percent to Rs 659.4 crore.
• Operating margin contracted to more than half to Rs 11.2 percent.

Idea Cellular’s plan to merge with Vodafone India to create the nation’s largest telecom operator received the final approval from the Department of Telecommunications last week, according to a report by newswire PTI. The merger is expected to be completed by August, the report quoted Vodafone Group CEO Vittorio Colao as saying.

Shares of the telecom company fell as much as 5.4 percent to Rs 55.25 in early morning trade, making it the worst performer on the BSE 100 Index. The stock had risen 3.6 percent yesterday.

Here’s what brokerages take on Idea Cellular’s June quarter performance:

CLSA

• Downgraded to ‘Sell’ from ‘Buy’; cut price target to Rs 51 from Rs 70.
• June quarter’s revenue was in-line, but Ebitda came below estimates.
• Operating metrics were also weak.
• Merged Co. funded, but gearing still out of hand.
• Expect net debt to be 6.6 times Ebitda by March 2021, will still remain uncomfortable.

Kotak Securities

• Maintained ‘Reduce’ with a price target of Rs 75.
• June quarter’s earnings were weaker then expected.
• Also much weaker than Bharti’s on most operating metrics.
• Equity infusion, a meaningful one, could be needed sooner than expected.