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Quarterly report q4_09
1. !dea Quarterly Report Mar‘09 Page 1 of 15
Idea Cellular Limited
An Aditya Birla Group Company
Quarterly Report
Fourth Quarter ended March 31, 2009
A D I T Y A B I R L A G R O U P
Registered Office: Suman Tower, Plot No. 18, Sector 11, Gandhinagar 382011, India
Corporate Office: 5th
Floor, Windsor, Off C.S.T. Road, Near Vidya Nagari, Kalina
Santacruz (East), Mumbai 400 098, India
2. !dea Quarterly Report Mar‘09 Page 2 of 15
Supplemental Disclosures
Unless stated otherwise, the financial data in this report is derived from our unaudited / audited consolidated financial
statements prepared in accordance with Indian GAAP. Our financial year ends on March 31 of each year, so all references to
a particular financial year are to the twelve months ending March 31 of that year. In this report, any discrepancies in any
table between the total and the sums of the amounts listed are due to rounding-off. There are significant differences
between Indian GAAP, IFRS, and U.S. GAAP; accordingly, the degree to which the Indian GAAP financial statements will
provide meaningful information is dependent on the reader’s level of familiarity with Indian accounting practices. Any
reliance by persons not familiar with Indian accounting practices on the financial information presented in this report should
accordingly be limited. We have not attempted to explain those differences or quantify their impact on the financial data
included herein.
Unless stated otherwise, industry data used throughout this report has been obtained from industry publications. Industry
publications generally state that the information contained in those publications has been obtained from sources believed to
be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we
believe that industry data used in this report is reliable, it has not been independently verified.
Actual results may differ materially from those suggested by the forward-looking statements due to risks or uncertainties
associated with our expectations with respect to, but not limited to, our ability to successfully implement our strategy, our
growth and expansion, technological changes, our exposure to market risks, general economic and political conditions in
India which have an impact on our business activities or investments, the monetary and interest policies of India, inflation,
deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the
performance of the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and
changes in competition in the industry
Report Structure Page No..
1. Performance at a glance 3
2. Company Overview 3
3. Reporting Guidelines 5
4. Financial Highlights 6
5. Key Performance Indicators 8
6. Management Analysis & Discussion 10
7. Stock Market Highlights 13
8. Shareholding Pattern 13
9. Glossary 14
3. !dea Quarterly Report Mar‘09 Page 3 of 15
1. Performance at a glance – Idea Standalone1
2. Company Overview
Idea Cellular Limited (“Idea”) is a leading mobile services operator in India, with ~ 39 mn subscribers as on March‘09. Idea
has a subscriber market share of 19.5% in its 8 established service areas, and 14.5% in its 13 operating service areas.
After inclusion of Spice Communications, Brand !dea has 43.02 mn subscribers, corresponding to a 11.0% national market
share.
A. Promoter Group
Idea is part of the Aditya Birla Group, India's first truly multinational group. The Group has businesses in sectors ranging
from metals, garments, cement, fertilisers, life insurance and financial services among others. Over 50% of the Group’s
revenues are derived from overseas operations. The group operates in 25 countries, and is anchored by an extraordinary
force of over 125,000 employees belonging to 25 nationalities. The current Group holding of 49.13% in Idea is made up of;
Aditya Birla Nuvo Ltd. 27.02%
Birla TMT Holdings Pvt. Ltd. 9.15%
Hindalco Industries Ltd. 7.37%
Grasim Industries Ltd. 5.52%
IGH Holdings Pvt. Ltd. 0.08%
Total 49.13%
4. !dea Quarterly Report Mar‘09 Page 4 of 15
B. Key Shareholders
AXIATA Group Berhad, previously TM International Berhad, through its affiliates has 14.99% shareholding in Idea
Cellular, and a 49.0% holding in Spice Communications. With the proposed merger of Spice Communications into Idea
Cellular, the Axiata Group holding in Idea Cellular would increase to around 20%. The Group, is one of the largest Asian
telecommunication companies, focused in high growth low penetration emerging markets. AXIATA has a controlling interest
in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia with significant strategic stakes in India and Singapore. India
and Indonesia are some of the fastest growing markets in the world. In addition, the Malaysian grown holding company has
assets in telecommunication operations in Thailand, Pakistan and Iran. As of December 2008, the Group, including its
subsidiaries and associates, has close to 90 million mobile subscribers in Asia. The Group provides employment to over
25,000 people across Asia. Upon its de-merger from Telekom Malaysia in April 2008, AXIATA became an independent entity
and simultaneously listed on the Malaysian stock exchange.
Providence Equity Partners, through its affiliates has a 10.6% shareholding in Idea, and has also invested Rs. 20982 mn
in ABTL through Compulsorily Convertible Preference Shares.
C. Corporate Structure
Idea Cellular Limited (Idea)
100% -- Idea Cellular Infrastructure Services Limited (ICISL)
100% -- Idea Cellular Services Limited (ICSL)
100% -- Swinder Singh Satara & Co Limited (SSSL)
41.1% -- Spice Communications Limited (Spice)
100% -- Aditya Birla Telecom Limited (ABTL)
100% -- Idea Cellular Tower Infrastructure Limited (ICTIL)
16% -- Indus Towers Limited (Indus)
IICCIISSLL – tower company owning towers in Bihar and Orissa service area.
IICCSSLL – provides manpower services to operating entities i.e. Idea & ABTL.
SSSSSSLL – holds MSC real estate in the Delhi service area.
SSppiiccee – provides GSM based mobile services in Punjab and Karnataka service areas.
AABBTTLL – provides GSM based mobile services in Bihar service area, and has 16% shareholding in Indus.
IICCTTIILL – holds towers de-merged from Idea, which will subsequently merge in Indus.
IInndduuss – a joint venture between Bharti Infratel, Vodafone Essar and Idea (through ABTL), to provide passive infrastructure
services in 15 service areas.
5. !dea Quarterly Report Mar‘09 Page 5 of 15
DD.. Operating Service Areas (as on April 2009))
3. Reporting Guidelines:
To facilitate an analytical perspective, the results have been formatted and grouped as under:
a) Standalone – Idea, and its 100% subsidiaries, grouped together on a standalone basis. Effectively, this encompasses
all mobile operations in India, excluding Spice and Indus.
b) Consolidated – Idea and its 100% subsidiaries, and JVs, grouped together. This covers Idea operating service areas
and the ABTL operating service area of Bihar, the proportionate consolidation of Indus (16%), and the proportionate
consolidation of Spice (41.09% w.e.f. October 16, 2008).
JV financials have been consolidated as jointly controlled entities as per “AS 27 - Financial reporting of Interests in
Joint Ventures”. It may be noted that the consolidation of financials of two or more entities requires elimination of inter
entity transactions. Illustratively, rentals paid by Idea to Indus, become expenses for Idea and revenues for Indus, on a
standalone basis. However, upon consolidation, the proportionate revenue of Indus gets reduced to the extent contributed
by Idea. The rental expenses of Idea also stand correspondingly reduced in the consolidated financials.
Brand “!dea” covers 16 telecom service areas, viz, Maharashtra & Goa, Gujarat,
Andhra Pradesh, Madhya Pradesh & Chhattisgarh, Delhi, Kerala, Haryana, Uttar
Pradesh West & Uttaranchal, Rajasthan, Uttar Pradesh East, Himachal Pradesh,
Mumbai, Bihar & Jharkhand, Orissa, Punjab and Karnataka, covering ~ 80% of
the all India subscriber base. Of these, the 3 service areas of Rajasthan, UP East
and Himachal Pradesh, were rolled out during Sep-Nov’06, while the 2 service
areas of Mumbai and Bihar became operational during Aug-Oct‘08. The service
areas of Punjab and Karnataka were added through Spice w.e.f October 16,
2008.
Brand Idea has only recently extended to the Orissa service area with the launch
of commercial operations in April 2009.
6. !dea Quarterly Report Mar‘09 Page 6 of 15
4. Financial Highlights
A. Standalone Profit & Loss Account
IINNRR mmnn
B. Consolidated Profit & Loss Account
IINNRR mmnn
7. !dea Quarterly Report Mar‘09 Page 7 of 15
C. Revenue & Profitability Break-up
INR mn INR mn
8. !dea Quarterly Report Mar‘09 Page 8 of 15
D. Summarized Balance Sheet
IINNRR mmnn
5. Key Performance Indicators
A. Financial Indicators – Idea Standalone
9. !dea Quarterly Report Mar‘09 Page 9 of 15
B. Operational Indicators – Idea Standalone
C. Operational Indicators – Spice
10. !dea Quarterly Report Mar‘09 Page 10 of 15
6. Management Discussion & Analysis
Fastest Growing Major Telco – Back to Back Years of Strong Market Gains
Standalone revenues for the quarter at Rs. 28,626 mn, grew 9.2% on a QoQ basis. In a period marked by economic
downturn and increased competitive and price pressure, Idea was able to maintain its strong growth momentum. Annual
revenues of 99,622 mn show a growth of 47.9% compared to the last year. This revenue growth of 47.9%, on the back of
the FY08 revenue growth of 53.6%, places Idea as the fastest growing major operator in one of the largest, fastest growing,
and most competitive telecom markets in the world.
*due to change in subscribers recognition criteria
In the newly launched service areas of Mumbai and Bihar, Idea has acquired a 4.0 % share of the combined market, with a
net adds market share of 16.6%, during last 6 months.
Total Minutes on the Network at 44,224 mn grew by 9.9% on a QoQ basis. The Average Realised Rate per Minute, which
had moved up from 62p to 64p in the previous quarter, settled at 63p.
Indus IRU Impact
Idea (standalone) rent-paying cell sites jumped from 21,459 at Dec’08 quarter end to 36,573 at Mar’09 quarter end. This
increase of 15,294 cell sites includes 11,094 cell sites on Idea towers, transferred to Indus, through the IRU effective
January 1, 2009. As of March’09, out of the 36,573 rent paying cell sites, 25,150 cell sites are on Indus Towers. The
accounting treatment of the IRU arrangement increased the network operating cost for the March’09 quarter. Rental income
that Idea was deriving from guest sites also ceased w.e.f. January 1, 2009, as these would accrue to Indus. The combined
impact of these 2 factors was the equivalent of ~ 3.4 % EBITDA contraction for the quarter ended March’09. Until the
merger into Indus is consummated, Idea will account for depreciation for the IRU towers. However, Idea will receive an IRU
income for the transferred towers until the merger, which for the quarter ended March’09 was the equivalent of ~1.2% of
the EBITDA. Therefore, the net negative EBITDA impact for the quarter was ~2.2 %. The above treatment does not include
Idea’s pro-rata share of Indus’ profit/loss. The financials do not also capture the notional capex cost saving derived because
of Indus, and the speed to market benefit.
Upon consolidation, Idea’s share of 16% of Indus revenues is Rs. 1,870 mn. However, with consolidation eliminations, no
revenue has been consolidated. An equal amount has been eliminated from the Indus rentals accounted by Idea. Further
Idea has consolidated Rs. 1,196 mn as 16% share of Indus operating expenses, after elimination of IRU income received
from Indus.
Idea on a standalone basis, added 4.7 mn subscribers in the
quarter, its highest ever. For the entire year FY09,
subscriber base has grown by 79.2 %. In its 8 established
service areas, Idea strengthened its market position by
gaining 1% market share, and consolidating its position
close to the market leader. In the 3 gestating service areas,
Idea also increased its market share to 6.3%, from 5.8% a
year ago.
11. !dea Quarterly Report Mar‘09 Page 11 of 15
Network Capacity
Idea rolled out 4,941 cell sites during the March’09 quarter, taking the FY09
tally to 19,437, and the EoP cell sites to 44,230. In the preceding year FY08,
Idea had added 14,679 cell sites. Thus, in the last 2 fiscal years, Idea has
enhanced its cell site capacity 4.4 times, representing a massive
enhancement of capacity to build competitive strength.
The capacity already built, together with improved spectrum availability and
enhanced technology features will result in greater capex efficiency in FY10,
and reduced capex intensity.
Total capex for FY09 was Rs. 54.5 bn. For FY10, including for new service area launches, the capex will indicatively be in the
region of Rs. 60.0 bn. This estimate does not factor the unknown impact of a possible 3G auction.
Financial Performance
At the EBITDA level the net negative impact of Indus IRU is 2.2% for the quarter. However, EBITDA margin for Q4 at 25.9%
is almost similar to the Q3 margin, indicative of other operational efficiencies which have absorbed the negative Indus IRU
impact.
Depreciation & Amortization for FY09 at Rs.13,212 mn increased by 50.7% on a YoY basis. Net interest and finance cost for
FY09 at Rs.4,070 mn increased by 46.6% on a YoY basis.
PAT for the quarter at Rs.3,032 mn was higher by 18.3% on a QoQ basis. After absorbing the losses of the new launches of
Mumbai and Bihar, Profit after Tax for FY09 was Rs.9,754 mn.
New Launches
Brand Idea has expanded its wings to its 16th
service area, with the commercial launch of Orissa in April 2009. With this,
Idea now covers ~ 80% of the national subscriber base. Preparatory work for other roll outs is on track, with Tamil Nadu
planned for the Jun’09 quarter. Within the calendar year 2009, Idea plans to have pan India operations.
Tailored Approach for Different Service Areas
Idea holds 900 MHz GSM spectrum in 9 service areas, which make up ~50% of
the national market. This frequency band confers capex and opex benefits. It is
also accompanied by early mover advantage. Idea is the mobility revenue market
leader in 3 of these service areas, and is overall in the second spot. The twin
advantages of spectrum and scale underpin Idea’s enduring competitive edge.
In some of the remaining service areas, Idea pursues a strategy of optimisation
as opposed to maximisation. It plans to achieve a pan India footprint and
leverage synergies of scale and wider presence, and calibrated capex spend
through infrastructure sharing. The focus is on operational and financial goals,
and not on league tables.
The service area tailored strategy is designed to enhance Idea’s long term
competitiveness.
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12. !dea Quarterly Report Mar‘09 Page 12 of 15
Update on Spice Communications
The accounts of Spice continue to be consolidated in proportion of the shareholding of 41.09%, until its eventual merger
into Idea. Finalisation of the merger scheme is in an advanced stage and will be effective after the court order.
Update on Indus Towers
As the 3 shareholders, Bharti Infratel, Vodafone Essar Ltd and ABTL (100% subsidiary of Idea) signed the IRU with Indus
effective January 01, 2009, Indus has started invoicing respective entities for the sites covered by the IRU. Idea has filed
the scheme for demerger of towers to ICTIL. This will be followed by the filing of the merger scheme of ICTIL with Indus.
14. !dea Quarterly Report Mar‘09 Page 14 of 15
9. Glossary
Definitions/Abbreviation Description/Full Form
Annualized EBITDA Annualised figure of quarterly EBITDA
ARPU (Average Revenue Per User) Is calculated by dividing services revenue (exclusive of activation
charges and infrastructure revenues) for the relevant period by the
average number of subscribers during the period. The result obtained is
divided by the number of months in that period to arrive at the ARPU
per month figure
AS Accounting Standards as issued by the Institute of Chartered
Accountants of India
ARR (Average Realised rate) ARR is calculated as ARPU divided by MoUs
Churn Churn relates to subscribers who are removed from the EoP base for
discontinuing to use the service of the company.
Circle/ Service Area Unless otherwise specifically mentioned, means telecom circles in India
(including metropolitan circles) as defined by the DoT. Circles are
classified as metropolitan circles and as category ‘A’, ‘B’ or ‘C’ Circles.
The Circles are classified on the basis of the revenue generation capacity
of each circle with category ‘A’ being considered the most revenue
generating
EBIT Earnings Before Interest and Tax
EBITDA (Earnings before interest,
tax, depreciation and amortisation)
This is the amount after deducting operating expenditure from total
income. Total income is comprised of service revenue, sales of trading
goods and other income. Operating expenditure is comprised of cost of
trading goods, personnel expenditure, network operating expenditure,
license and WPC charges, roaming and access charges, subscriber
acquisition and servicing expenditure, advertisement and business
promotion expenditure and administration and other expenses
EoP End of period
FY /Fiscal Financial year ending March 31
GSM Global System for Mobile communications, the most popular standard
for mobile phones in the world
Indian GAAP Indian Generally Accepted Accounting Principles
IRU Indefeasible right of use
MoUs/Sub (Average Minutes of
Usages per Subs)
We calculate the MoUs/Sub as , total Minutes of Use in our network
during the period divided by average of subscribers during the period
Net Adds Refers to net customer additions which is calculated as the difference
between the closing and the opening customers for the period
Net Debt Total loan funds reduced by cash and cash equivalents
Net Worth Calculated as summation of Share Capital and Reserves & Surplus
reduced by debit balance of profit & loss account
PBT Profit before tax
PAT Profit after tax
ROCE ROCE is calculated as a) for the year : PAT plus gross int. & fin. cost
divided by average capital employed for the year, b) for the quarter :
PAT plus gross int. & fin. cost for the quarter is annualised and divided
by capital employed for the quarter. Capital employed is taken as
average of opening and closing of Shareholders funds and Loan Funds
reduced by debit balance of P&L account, for the respective period
Subscribers Mobile telephone service customers
TRAI Telecommunications Regulatory Authority of India, constituted under the
Telecommunications Regulatory Authority of India Act, 1997
