Idea closes in on $1b-sales mark

MUMBAI: Cellular is set to become a billion-dollar company. On the back of expanded operations and increased subscriber base, the 11-circle operator is expected to earn over Rs 4,300 crore in revenues during FY07. This will be a growth of almost 45% over the previous fiscal’s revenues of Rs 2,965 crore.

According to industry analysts, the telco is on track to touch the billion-dollar mark as the number of users on its networks has almost doubled to over 14 million during the last financial year. Idea will be the sixth Indian operator to achieve the milestone after Bharti Airtel, BSNL, Hutchison Essar, Reliance Communications and Tata Teleservices. “Driven by the company’s subscriber ramp-up, we expect it to enjoy 45% CAGR in revenues and 47% CAGR in EBITDA,” market research firm CLSA said in a note on Idea Cellular. It estimates the company’s revenue for FY07 at Rs 4,310 crore and net profit at around Rs 420 crore. The rise in revenues was also due to operations in new circles of Rajasthan, Himachal Pradesh and Uttar Pradesh (East) within a span of two months. In these new circles, Idea has added over six lakh users in the past four-five months.

“We expect Idea to close the fiscal ‘07-08 with nearly 25 million users,” an analyst said. Idea’s growth was stunted until June last year due to some differences between joint venture partners the Tatas and Birlas. However, after the Birlas bought out the Tatas, the company’s revenues saw fast growth. In the nine months ended December ‘07, Idea earned Rs 3,000 crore in revenues and in the next three months, it made another Rs 1,500 crore.

“With rollouts in Bihar and Mumbai expected this year and incumbency advantage in some key circles like Delhi, Idea is poised to grow fast. Entry into newer circles and NLD operations will boost the topline in FY08,” said another analyst.

The Idea scrip closed at Rs 115.50, up 0.70% on Monday. Idea has announced a capex of $2 billion for the next two years. It has inked an outsourcing pact with technology giant IBM. The 10-year contract is valued at between $600 million and $800 million. “We estimate that network outsourcing can add 120-180 bp to Idea’s EBITDA margins every year,” research firm Lehman Brothers said.

Pune-based Idea, which listed on bourses in March ‘07, is the sixth largest telco in India. Largest player Bharti Airtel, which offers services in all the 23 circles, had reported revenues of $1.1 billion during the third quarter of FY07.

Idea has 8.6% share in the Indian telecom market which has nine GSM and four CDMA operators. Idea is among the top three mobile operators in six circles, including the high per capita income states of Maharashtra, Gujarat and Haryana and Kerala. It has a higher market share of 20-23% in critical circles — Maharashtra, Madhya Pradesh, Haryana, UP (west) and Kerala.