Idea Cellular profit falls 31% to Rs 201 crore on higher costs

MUMBAI: Telecom operator Idea Cellular’s first quarter net profit was down 31% due to operational loss on newly launched service areas, a provision for higher spectrum charges, and falling prices of call rates resultant of intense competition in the Indian scenario. The company reported a profit of Rs 201.4 crore for the quarter ended June 30, 2010, on the back of Rs 3,654 crore revenue that was 23% higher than the year-ago period. The result was broadly in line with analysts’ estimates.

Since June last year, at least three more operators have started operations including Norway’s Uninor. The new players are attracting customers by offering discounts on already low calling rates. In the second quarter last year, Tata DoCoMo launched its one-paise-per-second rate that led to halving of realised rate per minute of calling across the industry as competitors matched the offering.

Idea Cellular’s realised rate per minute fell 6% to Rs 0.44 in April-June from the previous three months. Average revenue per user fell 2%. While the decline is much lower than the earlier quarters, some of its impact will continue to show in the coming quarters, analysts said. Sanjeev Aga, the company’s managing director said, Idea is also inclined to continue competing with other operators on price, although it will not initiate another price cut on its own.

The company’s operating margin fell 3.3% from the earlier quarter, as the losses on Idea’s more recently launched service areas reduced. “We have stabilised the peak operating expenditure on our new circles now. But with the current environment, profitability is a longer term game,” Mr Aga said.