Tata Teleservices (Maharashtra)
OPM improvement continues
With more than 5 million subscribers base as on 31st March 2008, Tata Teleservices Maharashtra (TTML) reported net revenue of Rs 455.72 crore for Q4 FY08, up 20% on Y-o-Y and 4% on Q-o-Q. The operational efficiency initiatives taken by the company have resulted in 250 bps Y-o-Y and 50 bps Q-o-Q improvement in the OPM to 25.2%. At operating level the company reported profit of Rs 114.86 crore (33% higher on Y-o-Y and 6% higher on Q-o-Q) and reported cash profit before EO (PBDT) of Rs 65.76 crore, up 36% on Y-o-Y but down 13% on Q-o-Q. However the company is yet to come out of red and recorded loss of Rs 20.59 crore at bottom-line for the quarter against net loss of Rs 27.43 crore in Q3FY08.
For the year ended March 2008, the revenue of the company increased by 21% to Rs 1707.19 crore while the OPM surged by 330 bps to 23.6% for the year. The operating profit also surged by 41% to Rs 403.14 crore. The PAT ended at loss of Rs 125.74 crore against loss of Rs 310.61 crore in FY07, thus 60% lower on Y-o-Y.
The company has added 3.83 lakh subscribers during Q4 FY08 (against 5.69 lakh subscriber addition in Q3 FY08 and the total subscriber base of company reached to 5.08 million at the end of March 2008 and thus achieved a growth of 8% in subscriber base on Q-o-Q basis. The mobile and WLL segment was the main growth driver in which the company has added 4 lakh subscribers (92% of total additions during the quarter) while in wireline segment the company has added just 0.40 lakh subscribers (0.29 lakh in Q3 FY08) during the quarter.
In FY08 the company has added 2 million subscribers and the incremental wireless market share of the company was 15.8% with total wireless market share of 13.5% in Mumbai and Maharashtra (circles in which the company operate).
Performance for the quarter ended March 2008(On Y-o-Y basis)
With strong subscriber addition (about 0.38 million subscriber addition during Q4 FY08) and continuous thrust on rural market, the revenue for the quarter ended March 2008 grew by 20% to Rs 455.72 crore on Y-o-Y. The operational efficiency initiatives taken by the company have resulted in 250 bps improvement in the OPM to 25.2%. The interconnect & other access cost and employee cost (as a % of revenue) declined by 140 bps and 120 bps respectively to 25.5% and 5.3% while the network operation cost surged by 120 bps to 18.1% of revenue. The company reported Rs 114.86 crore operating profit, up 33% on Y-o-Y basis.
The company has reported net interest and finance cost of Rs 52.79 crore (including foreign exchange fluctuation gain of Rs 3.69 crore) during the quarter against Rs 43.50 crore in Q4 FY07 and the depreciation charges has increased by 13% to Rs 117.82 crore. The company has pared the loss at PBT level by 7% to Rs 52.06 crore against a loss of Rs 56.15 crore in corresponding previous quarter. After considering the EO income of Rs 31.78 crore relating to amount pertaing to previous quarters of FY08 (Rs 4.82 crore in Q4 FY07), the loss at PBT after EO level stood at Rs 20.28 crore, 56% lower loss on Y-o-Y. The company has not made any provision for current income tax due to anticipation of no taxable income for the year. However, company has provided an amount of Rs 0.31 crore for fringe benefit tax (Rs 0.05 crore in Q4 FY07). At the end, the company has reported 55% lower net loss to Rs 20.59 crore as compared to a loss of Rs 45.90 crore in the corresponding previous quarter.
Performance for the quarter ended March 2008 (On Q-o-Q basis)
On Q-o-Q basis the net revenue of the company increased by 4% and the OPM improved by 50 bps to 25.2% mainly due to 190 bps decline in marketing & business promotion expenses to 15.4% of revenue which was partly offset by 100 bps increase in network operations cost to 18.1% of revenue. The profit at operating level increased by 6% on Q-o-Q basis to Rs 114.86 crore.
The other income declined by 58% to Rs 3.69 crore while the interest cost surged by 26% to Rs 52.79 crore. The depreciation charges increased by 4% over the quarter to Rs 117.82 crore. As a combined result of decline in other income and surge in interest and depreciation charges, at PBT before EO level the loss of the company increased by 36% on Q-o-Q to Rs 52.06 crore and after considering aforesaid EO income of Rs 31.78 crore (EO income of Rs 10.94 crore in Q3 FY08), the loss at PBT after EO level came down by 26% to Rs 20.28 crore. After considering the provision for tax of Rs 0.31 crore during the quarter, the company reported net loss of Rs 20.59 crore, 25% lower from loss of Rs 27.43 crore in Q3 FY08.
Performance for year ended March 2008
For the year ended March 2008, the revenue increased by 21% to Rs 1707.19 crore. As a combined result of 250 bps and 170 bps reduction in interconnection & other access cost and administrative & other expenses as a % of revenue to 25.6% and 10.8% respectively and 80 bps increase in marketing & business promotion expenses to 17.7% of revenue, the operating profit margin of the company surged by 330 bps to 23.6% for the year. The operating profit also surged by 41% to Rs 403.14 crore.
The other income for the period was Rs 69.48 crore (Rs 17.44 crore in corresponding previous year). After considering the interest cost of Rs 171.01 crore (including foreign exchange fluctuation gain of Rs 10.24 crore), almost same as in FY07 and 2% decline in depreciation charges to Rs 439.35 crore, there was a loss of Rs 137.74 crore at PBT level against loss of Rs 315.39 crore in FY07. After considering EO income of Rs 12.93 crore (pertaining to excess provision of previous years written back), the loss at PBT after EO level stood at Rs 124.81 crore, 60% lower on Y-o-Y. With provision for only fringe benefit tax of Rs 0.93 crore, the PAT ended at loss of Rs 125.74 crore against loss of Rs 310.61 crore in FY07, thus 60% lower on Y-o-Y.
Recent Development
The Department of Telecom has filed an appeal with the telecom tribunal seeking to impose a penalty of Rs 2,015 crore on TTML for defaulting on payment of licence fee for fixed line telephone services in Karnataka. The issue dates back to year 1995 when Hughes Telecom acquired licences for Karnataka and Maharashtra but never roll out services in the southern State. Hughes Tele was later acquired by the Tatas but even they did not start services in Karnataka. The penalty sought by DoT is for non-payment of licence fees during these years and the interest accrued.
Based on the legal opinion taken by it, TTML does not expect any liability arising out of this counter claim, and therefore the sum claimed by DoT would continue, as in the past, to be shown as a contingent liability in the notes to the accounts.
The shares of the company are trading at around Rs 36 (LTP on 22nd May 2008) at BSE.
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