Axiata's 19.7%-owned Indian associate, Idea Cellular (Idea), reported revenue growth of 3% q-o-q (+22% y-o-y) while headline EBITDA expanded 6% q-o-q (+19% y-o-y) to INR14.4bn for 1QFY13. Excluding forex losses, the telco's core earnings of INR2.6bn reflect a growth of 15% q-o-q (+45% y-o-y).

Missing estimates. Idea's core earnings for the June quarter (1QFY13) were below expectations, with 2QFY13 likely to be a weak one too, due to seasonality. The results were characterized by: (i) a deceleration in revenue growth (+2.5% q-o-q) after two quarters of above average numbers, and (ii) EBITDA margin pressure from the decline in the average revenue per minute (RPM). The telco was affected by the new consumer protection ruling in India, which set a cap on the processing fee for reload vouchers and the company's inability to pass on the 2% increase in service tax to its subscribers. This contributed to a 3% q-o-q slide in RPM to INR0.41 and the 2%-pts drop in EBITDA margin to 26.1%, excluding the INR1.5bn one-off cost booked in the previous quarter. Idea's net profit contracted 2% q-o-q as it accelerated depreciation by INR480bn and booked in forex losses from the depreciation of the INR.

Higher VAS from SMS interconnect recognition. Idea's value added services (VAS) revenue contribution inched higher to 14.5% from 14.3% in 1QFY13 but the latest quarter's number included the SMS interconnect revenue (previously booked under mobile revenue), which will be the standard going forward. Stripping this out, VAS revenue would have exhibited a slight decline.

3G contribution still immaterial. Idea said 3G remains a very important component of its overall longer term vision and it is committed to expanding the proportion of revenue coming from data. The company's 3G coverage is currently available in more than 3,000 towns and 10,000 villages. It added 500k active 3G subscribers during the quarter to 3.1m (+19% q-o-q), generating incremental APRU of INR88 (-3% q-o-q).