Idea Cellular net profit rises less than expected

An electrician speaks on his mobile phone in Mumbai October 11, 2006.

NEW DELHI (Reuters) - Idea Cellular Ltd (IDEA.NS) reported a smaller-than-expected 14 percent increase in quarterly profit as higher network operating costs ate into margin.

Idea, India's best-performing telecoms stock last year, said on Tuesday consolidated net profit rose to 2.29 billion rupees for its fiscal third quarter ended December 31, from 2.01 billion rupees a year earlier.

It was the third straight quarter of earnings growth for the country's No. 3 mobile carrier by revenue.

Revenue rose an annual 11 percent to 55.79 billion rupees at the company, part of the Aditya Birla conglomerate and also part-owned by Malaysia's Axiata Group Bhd.

Analysts had expected Idea to report net profit of 2.65 billion rupees on revenue of 55.20 billion rupees, according to Thomson Reuters I/B/E/S.

Unlike rivals such as market leader Bharti Airtel Ltd (BRTI.NS) and Reliance Communications Ltd (RLCM.NS), Idea operates only mobile phone services, not submarine cables and fixed lines, and has exposure only to the domestic market.

Bharti has expanded into other markets including Africa, where it faces high costs and is struggling to improve margins. Some analysts and investors favour Idea for its more focused approach.

Morgan Stanley said in a note last Friday it expected Idea shares to outperform the country's main indexes in the next 15 days as the company's earnings were likely to be viewed positively by markets.

The domestic outlook for big Indian carriers has improved in recent months as several smaller rivals have either folded or cut back operations after a court order last year to revoke permits awarded in a scandal-tainted sale.

Bharti Airtel and Idea recently raised call prices by withdrawing offers and cutting discounts as they face higher costs.

Idea said its average realised rate per minute (ARPM), a key metric for telecom network operators, fell to 0.411 rupees in December quarter from 0.413 rupees in the previous quarter. Adverse currency movement led to a foreign exchange loss of 133 million rupees during the quarter, it said.

Ahead of the earnings, shares in Idea, valued at about $7 billion, closed 0.9 percent higher at 113.90 rupees.

(Reporting by Devidutta Tripathy and Aradhana Aravindan; Editing by Daniel Magnowski and Mark Potter)