Idea net profit up 90 percent as competition tapers off

NEW DELHI/MUMBAI Mon Apr 28, 2014 8:31pm IST

A man speaks on his mobile phone as he sits in front of a shop displaying the Idea Cellular Ltd's logo on its shutter in Mumbai April 28, 2014. REUTERS/Danish Siddiqui

A man speaks on his mobile phone as he sits in front of a shop displaying the Idea Cellular Ltd's logo on its shutter in Mumbai April 28, 2014.

Credit: Reuters/Danish Siddiqui

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NEW DELHI/MUMBAI (Reuters) - Idea Cellular Ltd (IDEA.NS) reported a 90 percent jump in quarterly profit and said it was confident about growth, as phone carriers benefit from reduced competition in the world's second-biggest mobile phone market after a long price war.

Idea, the country's third-biggest mobile phone operator by users and revenue, on Monday said consolidated fiscal fourth-quarter profit rose to 5.9 billion rupees ($97.3 million), ahead of analysts' estimate of 5.25 billion.

Top mobile carriers in India last year started gaining market share and were able to raise prices of voice calls, their mainstay, after a gap of almost three years, following a court order on a licensing scandal that forced some smaller companies out of the market.

Mobile data is still about 10 percent of the sector's revenue, but high-margin offerings are growing faster than voice as more Indians log on to the Internet from their phones, helping carriers' revenue growth.

"One of the key factors is: the intensity of competition has come down," Idea Managing Director Himanshu Kapania told a news conference in Mumbai after the results. "The company is extremely confident that it will continue to grow in momentum."

Idea, part of the Aditya Birla conglomerate and nearly a fifth owned by Malaysia's Axiata (AXIA.KL), said revenue rose 16 percent from a year earlier to 70.44 billion rupees, ahead of estimates.

Monthly average revenue per user, a key metric for telecom carriers, rose 2.4 percent sequentially to 173 rupees. However, another key metric, average realisation per minute (ARPM), fell 2.8 percent to 0.436 rupees.

Kapania said the fall in ARPM was a "one-off" and that the reduction in discounts was not hurting demand.

Unlike its bigger rivals, Idea's focus is only on mobile phone services and it operates within India, making it a preferred telecommunication stock for some brokerages.

However, regulatory payouts remain a risk for carriers. Idea, which bought airwaves worth $1.7 billion this year, will need to buy more airwaves to renew its permits in some service areas that are due to expire next year.

The entry of cash-rich conglomerate Reliance Industries (RELI.NS) into the telecommunication sector is also a negative for Idea and top mobile carrier Bharti Airtel (BRTI.NS).

Shares in Idea, valued at $7.7 billion, edged up 0.1 percent ahead of the results. The stock is down nearly 16 percent this year, underperforming a 2 percent gain in Bharti Airtel and a 7 percent rise in Nifty.

(Editing by Matt Driskill and Alison Williams)

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