Idea Cellular – Growth Disconnected

Idea Cellular’s revenue was up 5.8% qoq (47% yoy). EBITDA was down 16% qoq and 20% below estimate. Net income of Rs1.44bn (EPS: Rs0.50) was down 35% yoy and came in 44% below estimate.

ARPU dropped 6% qoq (3% in 1Q) to Rs266 as MOU/subscriber slid 3.5% (+4.1% in 1Q). We suspect this reflects: weaker quality of new subs and seasonality – reduced roaming during the monsoons. ARPM was down 3.6% qoq to Rs0.63/minute.

EBITDA margin collapsed 673bps as network and S&M costs soared 19.4% and 33.8%, respectively. Excluding Mumbai, the margin was down 520bps, which reflects rapid network expansion and brand building costs.