IDEA Cellular Q4FY13 Earnings Conference Call
April 26, 2013
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Idea Cellular limited
April 26, 2013
Moderator: Good afternoon ladies and gentlemen, this is Inba, the moderator for your conference
call. Welcome to Idea Cellular Conference. For the duration of this presentation, all participant lines
will be in the listen only mode. After the presentation, a question and answer session will be
conducted. We have with us today Mr. Himanshu Kapania – Managing Director of Idea Cellular and
Mr. Akshaya Moondra – Chief Financial Officer of Idea Cellular along with other key members of the
senior management on this call.
I want to thank the management team on behalf of all the participants, for taking valuable time to
be with us. Given that the senior management is on this conference call, participants are requested
to focus on the key strategic and important questions to make sure that we make good use of the
senior management’s time.
I must remind you that the discussion on today’s conference call may include certain forwardlooking statements and must be viewed therefore in conjunction with the risks that the company
faces. With this I hand the conference call over to Mr. Himanshu Kapania, thank you and over to you
sir.
Himanshu Kapania: Thank you Inba. On behalf of Idea, I welcome all participants to this earnings
call. Yesterday our Board of Directors adopted the audited results for the fourth Quarter and the full
financial year 2012-13. The detailed press release, quarterly report and results have been uploaded
on our website and I assume you had a chance to go through the same.
After 16 years of start of mobile operations, the board has recommended maiden dividend of Rs.
0.30 per share, a payout of Rs. 1163 million, including dividend distribution tax, to the Idea
shareholders for approval. Idea is thankful to its 2,70,000 retail and institutional investors who have
reposed faith in the company and have displayed remarkable patience.
The company is pleased to return strongly, after slow three quarters, to it’s upwards trajectory of
revenue growth with 8.6% sequential quarterly expansion, on back of 5% quarter-on-quarter growth
in Q3 FY13. Your company remains young at heart, nimble on her feet and razor sharp in its
execution. We continue to believe that this is an ‘Age of Opportunity’ even though this journey is
unpredictable and the future can no longer be extrapolated from the past - change is a
discontinuous function rather than a linear projection to the discomfort of many analyst colleagues.
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Idea Cellular limited
April 26, 2013
Our lives are being reshaped at numerous intersections with business performance becoming more
complex with a combination of headwinds and tailwinds and winners are those companies that
display ability to manage both the paradoxes.
We at Idea have set ourselves to meet the hopes and dreams of Indian individuals and communities,
helping the society to transition and the country to transform with the ubiquitous but not so well
understood ‘power of telecommunication’, not only in voice telephony but also in the exciting
emerging world of digital age. It is our constant endeavor to add value with a series of small and big
ideas as we help our consumers to move seamlessly to transact information, the key to intelligence,
knowledge and high state of consciousness.
Idea remains true to its brand slogan “An Idea can change your life”. In this environment it is our
role to separate the signal from the noise as the complex interplay between the policymakers,
judiciary, media and competition generate a series of headwinds which we periodically analyze to go
with the flow and here present our point of view on the external development.
Firstly, the contour of the competitive landscape is becoming clearer with five pan India GSM
operators and 3 to 4 regional operators, down from 2009 levels of 12 to 16 operators in each service
area. This is slowly but surely helping to bring back sanity to the market. The business models are
being reshaped with the importance of Gross Adds falling, power of channel commission to drive
business dropping and the last four years phenomena of increase in multi-SIM usage by same
customer on the wane. The key to success now is lower churn, high MoU per subscriber, improved
data penetration and higher number of Internet users on the mobile. Focus shifts back to classical
marketing, building long-term brand equity, improving consumer loyalty and longevity by increasing
subscriber sensitivity within the organization while assisting him to upgrade devices and lifestyles as
well as delivering superior service delivery infrastructure to meet increasing consumer demands and
aspirations.
Secondly, the key outcome of March 2013 auction in spite of global auction of a high-quality, low
frequency 900 MHz spectrum was, India did not attract any new large telecom company. Its other
impact on existing business dynamics, which is slowly dawning on all of us. While India offers the
lowest allocation of spectrum per serious operator and each megahertz of electromagnetic waves
carries the world’s highest hourly voice and data traffic, at the current reserve price the scenario is
unlikely to change quickly. The government will continue to hold a large chunk of commercial
spectrum without deploying the same for productive use.
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As per our internal calculations, government has a minimum of 286.1 MHz of 1800 MHz spectrum
received after Supreme Court cancelled licenses, plus an additional block return by the defense
forces, 85 MHz of 800 MHz spectrum, 200 to 250 MHz of 2100 MHz spectrum with an average 2 to 3
slots available for 3G spectrum in each circle. Separately 660 to 990 MHz of spectrum will become
available in the 700 MHz as and when regulator finalizes the channel design for this valuable 4G
spectrum. But inspite of need, this large spectrum quantum is unlikely to reach operators hands for
productive use due to gap in the ability of operators to pay high price for carrier waves and generate
sufficient surplus for the shareholders while offering amongst the world’s lowest price points to the
Indian consumers v/s expectation of government on spectrum reserve price. It may take a few years
when demand for the large unutilized spectrum converges with the availability until then the
country has to make good with the present quality of network and operators have to focus on
network capacity management.
Thirdly – while availability of right price spectrum remains a dream there has been an important
development on the 3G ICR case. The Honorable Delhi High Court adopted the order passed by the
Honorable Supreme Court in the matter pertaining to Bharti Airtel 3G ICR petition directing our
company not to extend 3G services to any new Idea Cellular customer on the basis of intra-circle
roaming arrangement until the next date of hearing. On the 3G ICR matter, the company believes it
has followed the highest standard of compliance to telecom licensing conditions and intra-circle
roaming was specifically permitted by DoT as per the NIA response. The competition in the 3G
market place will remain muted until the disposal of the 3G ICR petition in various courts. The future
of mobile broadband business in India is on hold until the courts give their final decision and
government finalizes its own policy on balance between quantum of short-term spectrum valuation
versus driving long-term competition in this phase.
Fourthly – Idea Cellular and its subsidiaries received two separate tax assessments orders dated
Sunday, March 31st, 2013, the last day of the last financial year. These tax demands are inconsistent
with established tax laws and past precedence. The company believes the demands are unjustified
and based on erroneous interpretation of current tax laws and the facts of the case. Idea has always
maintained the highest standard of tax compliance and holds that these demands are misplaced and
no tax is applicable. The tax demand pertains mainly to two unconnected heads. First disallowance
of revenue share license fee payment to DoT as an expense head for tax calculation. We are
confident that this will be resolved as Idea remains the only company in the sector where this
expense is not allowed. Second, as regards demand on our subsidiary company, ABTL, the same
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relates to the scheme of arrangement specifically approved by the relevant Honorable High Court
under Section 391 to 394 of the Companies Act, 1956, in December 2009 and January 2010. The
transaction involves a scheme of restructuring between a wholly-owned subsidiary and a parent
company with a sole objective of administrative consolidation of telecom licenses of one service
area in the parent company without any financial transactions. The company has challenged these
tax demands in appropriate forum and awaits the final outcome.
Besides the above developments and legal actions we eagerly await the decision of DoT on the
transfer of Spice operating license of Punjab and Karnataka to Idea. The Honorable Delhi High Court
besides reaffirming the amalgamation of erstwhile Spice Communications Ltd with Idea Cellular Ltd
has directed DoT to expedite the decision on the transfer application of Spice UAS licenses to Idea.
Linked to this transfer is the pending authorization for commercial use of 3G spectrum in Punjab
service area where Idea Cellular has paid Rs. 322 crores in 2010 as a part of 3G global auction bid
winning price. We are confident of resolution of both the above and early launch of 3G services in
Punjab.
We have also received LOI for the seven licenses against Spectrum won in November 2012 for a bid
Rs. 20,313 million and await the release of final unified license for the seven service areas. As most
of these matters are subjudice, Idea management team will not be able to take any further
questions on these topics.
Moving on to the business performance – As per TRAI’s latest Quarter 3FY13 gross revenue report
released for the Indian mobile sector, Idea has further strengthened its revenue market share to
14.8% consolidating its third ranking. The Company in the calendar year 2012 has improved standing
by 0.8% RMS in comparison to calendar year 2011. On a year-on-year basis Idea has clocked a
21.7% incremental revenue market share reaffirming the increasing consumer preference for brand
Idea.
Performance of the company on five critical parameters for the period January to March 2013
Quarter is as follows.
Point #1 – Gross revenue: In spite of two days short in the JFM quarter, the revenue has grown by
Rs. 4816 million, a sequential growth of 8.6%.When projections are measured on an equal day basis
between Quarter 3 and Quarter 4 of FY 13, Idea revenue growth reaches a gigantic double-digit
growth of 11% over the previous quarter. Explosive revenue growth this Quarter is led by sharp
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expansion of voice minutes @ 8.5% on a sequential basis and an incremental 8.3 million VLR
addition, nearly 56% of the annual VLR addition of 14.8 million additions. The win back of our
spectrum in seven cancelled license service areas in November 2012 was a momentous event and
this impact is being felt this quarter in the form of VLR and minutes growth.
The company maintains its enviable track record of being the fastest-growing large mobile operator
with the financial year 2012-13 gross revenue of Rs. 225,949 million, an annual growth of 14.8%
nearly 1.5 times the rate of industry growth. Contrary to the market expectation and in spite of our
best effort, the average realized rate per minute was flat at 41.2 paisa against 41.1 paisa per minute,
an improvement of 0.3% compared to Quarter3 FY 13. The voice realized rate at Idea will remain a
challenge as a proportion of MoU from new service area which operates at a lower rate than the
company average grows faster in the overall kitty despite even a rate improvement in the low voice
rate markets.
The non-voice revenue contribution has recovered to 15.2% against 14.6% in Quarter3 FY13 led by
data growth. The non-data VAS as a percentage of service revenue post the implementation of stiff
TRAI‘s VAS regulation continues to decline from the peak of 10.2% in Quarter2 this financial year to
8.6% in this quarter. The impact of VAS percentage has been smoothened with the improvement of
data as a percentage of service revenue from 5.4% in July to September 2012 quarter to 6.6% in this
quarter.
Separately in this era of falling ARPU the company is happy to report for the second quarter in the
row of improvement in average revenue per user to Rs. 167. The company ARPU has improved by
Rs. 19 per subscriber just over the last two quarters.
Point #2 – Cash profits and EBITDA: Exponential revenue growth has translated into higher quarterly
EBITDA of Rs. 16,731 million for Idea consolidated, a margin of 27.6%, an improvement of 1.2% in
EBITDA margin in spite of accounting for one off regulatory charge of Rs. 760 million reflected in
license and WPC charges. The company’s annual EBITDA for FY 13 has crossed the Rs. 60,000 million
mark at a margin of 26.7% on Idea consolidated business.
Our 13 Established Service Areas contributed to 87% of ‘Stand-alone business’ revenue. The
company is pleased to report a margin of 31.4% similar to performance of the market leader in
these Established Service Areas. The company remains committed to hold EBITDA losses for the
remaining 9 New Service Areas with a calibrated investment strategy and Idea is confident that this
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approach will further help in improving overall margins from the current level of annual 26.7% as
operational performance improves and capacity utilization scales.
The full-year ‘Cash Profit’ for the company on standalone basis stands at Rs. 46,968 million, an
improvement of nearly Rs. 10,900 million over FY 12, high growth of 30.2% providing enough
headroom to support future strategic intent and meet regulatory tax and other legally tenable
government demands. The annual ‘Profit After Tax’ at Rs. 10,080 million on a stand-alone basis for
FY13 is an improvement of 67% over FY12 even after accounting for cumulative deferred tax liability
at a higher tax rate proposed in the current financial year budget. The testimony of Idea has the
strongest balance sheet in the Indian telecom sector, is the company net debt to EBITDA now stand
at a comfortable 1.93 based on annualized figure of Quarter 4 FY13 EBITDA including accounting for
company commitment to Government of India, for auction amount of November 2012. Idea net
debt is at a healthy level of Rs. 115,881 million, among the lowest in comparison to all its peers.
Point#3 – Active subscribers: Based on TRAI report of February 2013, this year industry VLR growth
for the first 11 months has declined by over 70% from nearly 100 million additions in the period
April 2011 to February 2012, to only around 30 million net VLR addition April 2012 to February 2013.
But Idea has been able to perform in this declining VLR market and is happy to report market
leadership of 40% in terms of incremental VLR additional in these 11 months, doubling its
performance over the last year, same period. This Quarter4 FY 13 the VLR growth is back with the
company clocking 8.3 million incremental quarterly VLR additions. During the April to March 2013
financial year while the company reported only 8.9 million net additional subscribers with reported
EoP at 121.6 million, Idea in the same period has added 14.8 million VLR. Though Idea ‘Customer
Market Share’ (CMS) stands on a national basis only at 13.8% as on February 2013, our ‘Quarter3
FY13 RMS’ is higher at 14.8% and our ‘VLR market share’ is 2.7% ahead of CMS at 16.5%. Higher VLR
share gives confidence to the company to improve further its ‘revenue market share’ and margins in
the forthcoming quarters.
Another important development in the last six months is a change in the business model for
acquiring prepaid customers. The impact of stricter acquisition process and reduced channel
commission is further visible in this quarter churn performance. The Quarter4 FY13 ‘blended churn’
has dropped down to 4.3%, a whooping improvement of 5.8% in churn from a peak level of 10.1% in
Quarter2 FY 13, a saving of loss of over 6.7 million subscribers just in six months. The quality of
gross addition has improved significantly with the change in market working. In the past high churn
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was observed by customers replacing their recharge vouchers with a purchase of attractively priced
new SIMs. With industry modified subscribers acquisition criteria and instituting stricter verification
norm the multi SIM phenomena, the driving force of subscriber addition in the last four years is on
the decline. Current subscriber gross additions have a higher percentage of customers entering the
category for the first time. We believe that the same is reflected in the drop of industry VLR
subscriber net adds in FY 13 versus FY 12 as a fresh growth is predominantly from the first-time
users.
As predicted the MoU per subscriber has increased for Idea. In Quarter 4 FY13, MoU per subscriber
stands at 406 minutes an improvement of 47 minutes from a low 359 minutes per use in Quarter2
FY13. Separately our gold standard of reporting has helped us lead industry active base to reported
subscriber. Idea leads the industry reporting norms with 98.4% of our EoP on VLR on any given day
against improved industry standard of 82.7%. The benefit of same is reflected in increasing ‘Average
Revenue Per User’ which is now at Rs.167.
Point # 4 – Minutes of use: Our repeated assertion, there is still a lot of potential in the voice market
is, further corroborated by our Quarter4 minutes growth. This quarterly revenue growth is directly
linked to exponential expansion in voice minutes. The voice minutes exploded by 8.5% to 143.4
billion an expansion of 11.2 billion minutes in Quarter 4 in comparison to sequential Quarter 3 FY13.
Daily voice minutes have grown to 1.6 billion minutes a day, an improvement of 16.7% just in the
last two quarters, indicating consumer demand for mobile voice telephony remains robust.
We remain bullish on intrinsic consumer unmet demand, both in urban and rural markets and
therefore, continue to steadily grow our network coverage. Company now operates 90,094 GSM
sites, an expansion of 2,432 GSM sites during the current quarter. Further, Idea continued its
journey to strengthen its long-distance fiber backhaul and increase its presence in key metros and
spread mini metros fiber presence with expansion of 2,400 km of backhaul transmission cables,
overall reaching 74,000 km of fiber. Also, the company continued to strengthen its presence in NLD,
ILD and ISP business verticals. The NLD business vertical has grown by 24.1% by traffic on a year-onyear basis in FY 13, with accumulated NLD traffic of 46.19 billion minutes. The ILD business traffic,
more than doubled in FY 13 to 4.27 billion minutes, a business Idea only entered in 2009-10. The
company also expanded 2.5 time of its ISP capacity in the last four quarters and now handles over
24.5 gigabits per second data volume, mainly to support burgeoning mobile data demand. Idea
remains committed for a steady capital infusion across business verticals to build GSM & 3G
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network, NLD, ILD, ISP business and related capacity demands for core network and transmission
fiber in the forthcoming financial year of FY 14 with a similar level of capex as invested in the last
financial year.
Point #5 – Mobile Number Portability: As you are familiar, Idea is the biggest net gainer in the
‘mobile number portability’ program, a strong indicator of the popular appeal of Idea mobile
services. Idea has an overall net gain of 6.7 million customers as on 14th April 2013, from other
existing telecom operators. One out of every four existing mobile customer who choose to port out
today prefers Idea services. Existing mobile customers in India continue to port into Idea to enjoy
superior GSM network and responsive customer services, giving us the confidence to demand from
our employees across each service area a higher level of business performance.
Moving onto wireless data business – While we wait for full hockey stick demand curve for the 3G
business, we are experiencing early signs of tickle effect of growth in the overall wireless data
business. In the Quarter4 FY13 while voice customers VLR grew by 8.3 million net adds, incremental
data customer growth was comparative at 4.5 million net additions. This quarter Idea experienced
the highest data subscriber growth as EoP base of data users, blended for 2G and 3G, has risen to
26.2 million. Increased data subscribers helped to expand data volume by 13.8% on a sequential
quarterly basis to 11.4 billion megabytes from 10 billion megabytes in Quarter3 FY13.
Just in last four quarters, the daily data volume for Idea has exploded from 78.8 million megabytes
per day, in Quarter1 FY13 to 126 million megabytes in this quarter, an explosive growth of 61%
within the four quarters. Just like voice business, the volume of data is steadily reaching global scale
of operation, an emphatic reminder of Idea’s ability to manage scale of operations, quality of
company’s data network, IT systems and processes and growing ability to manage wireless data
business, even at world’s lowest data tariff.
The power of pervasive Internet is slowly but surely entering the lives of Indians beyond the metros,
beyond few knowledge workers, to masses. This is helping society transition from an ‘off-line’
personal interactive world to a beautiful emerging ‘online social age’. We are happy to report that
data realized rates represented by ARMB after a slide last quarter has recovered. This quarter the
blended ARMB from EDGE users on GSM platform and HSPA users on 3G platform has improved by
9.5%. The ARMB in Quarter4 FY13 stands at 33.9 paisa per MB, an improvement of 2.9 paisa per MB
from 31 paisa in Quarter3 FY13. With growth both in volume of data and realized rate, the company
is happy to report in Quarter4 FY13 sequential quarterly revenue growth for data at 24.6%. Mobile
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data alone now contributes to 6.6% to Idea’s service revenue, the blended 2G plus 3G ‘average
revenue of data users’ or colloquially known as ‘data ARPU’ is Rs. 55, an improvement of Rs. 3 over
the last quarter. The data contribution as a percentage of service revenue has improved by 2.1%
from 4.5% in Quarter1 FY13 to 6.6% in Quarter4 FY13.
Moving onto the last topic, the 3G business. Recently, the company launched three new Idea
branded 3G smart phones Zeal, Aurus-2 and Whiz. Zeal is a budget 3G Smartphone at an attractive
price of Rs.5,300. Aurus-2 is another entry level 3G Smartphone at Rs. 6,490 with latest Android
operating system, Jelly Beans and a high speed 1 GHz processor. Whiz is the first Idea branded
handset offer in the ‘4 inch screen category’ of smart phones and attractively priced at Rs.7,990 with
a fully loaded features to compete with popular branded handsets in the price range of Rs.12,000 to
Rs.15,000. Idea remains committed to develop the broadband wireless market and higher adoption
of 3G smart phones is key to the growth of high tech 3G for masses. Company believes that it has a
role to augment the effort of existing handset manufacturers by expanding distribution of affordable
smart phones especially across Idea 3G spectrum markets.
On an overall basis the 3G device penetration in Idea network by March 2013 had increased to 8% of
its 121 million EoP base. Nearly 10 million of Idea customers own 3G devices in our network, this has
helped the company to increase 3G active base to 5.1 million by the end of Quarter4 FY13, highest
net addition of one million during this quarter. The data ARPU for 3G active subscriber has increased
to Rs.105 against Rs. 97 in Quarter3 FY13, while the usage per 3G active data subscriber has slightly
declined at 608 Megabyte per subscriber from 628 MB in Quarter3 FY13.
Idea 3G network expansion program remains on track with additional 1595 3G sites added during
the quarter. On an overall basis the company now has rolled out 17,140 3G sites in the 10 of the
service areas, where Idea won spectrum in 2010 auction. Company now serves 4083 towns and
15,348 villages with this own 3G high-speed data HSPA plus network besides additional presence in
10 circles on the 3G ICR arrangement.
To summarize – the return of revenue growth trajectory at the rate of 8.6% on a sequential
quarterly basis, led by 8.3 million VLR additions, 8.5% sequential MoU growth, 4.5 million
incremental active data subscribers translated in Idea delivering over 60,000 million annual EBITDA
on a consolidated basis with 26.7% annual margins thereby bringing cheers to the company. Idea
remains one of the few telecom companies in the world, which is able to run high-quality telecom
services at the world’s lowers price point in voice and data and yet deliver stable cash profits.
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Improving capacity utilization, increasing brand popularity and the superior consumer service quality
with a strong balance sheet underscores Idea ability to benefit from long-term sector opportunities.
I now hand over to Akshaya to give you more details on the financials.
Akshaya Moondra: Thanks Himanshu. A very good afternoon to the participants from India and
good morning or evening as applicable to overseas participants.
Moving to our quarterly performance, we closed another quarter of strong performance, further
improving the competitive standing of the company. The standalone revenue of Rs. 60.9 billion was
up by 8.6% compared to last quarter. The revenue growth was primarily driven by growth of total
minutes on network by 8.5%. The strong volume growth, coupled with stable ARPM during the
quarter resulted in standalone EBITDA margin of 24.7%, an improvement of 1.2% compared to
23.5% in the last quarter, despite the one-off charge of Rs. 760 million in license and WPC charges.
There are several continuing litigations on various regulatory matters at different forums. We have
reviewed the same and have prudently made this provision while we continue to contest these
matters. Since these matters are subjudice , we will not be able to provide any further details on
these matters.
The effective income tax rate has increased from 32.45% to 33.99%. The deferred tax charge has
therefore increased during the quarter, because the cumulative deferred tax liability has been
accounted at the revised tax rate. The impact in this quarter of higher tax rate on the deferred tax
liability accumulated up to previous quarter is Rs.402 million.
The net profit for the quarter, after accounting for higher tax stands at Rs. 2.67 billion on a standalone basis, compared to Rs. 1.91 billion for the previous quarter. The consolidated net profit stands
at Rs. 3.08 billion after including Rs. 412 million as contributions from Indus. The cash profit for the
quarter stands at Rs. 13.07 billion, which funded the quarterly capex of Rs. 13.28 billion. Our capex
guidance for FY14 is Rs. 35 billion.
The net debt to EBITDA ratio based on the annualized EBITDA for the quarter stands at a healthy
level of 1.93. In terms of yearly performance also we have seen a strong year-on-year revenue
growth of 14.8% with an EBITDA margin improvement of 0.8%.
Many of you will be aware of the approval of Indus merger by the Honorable Delhi High Court,
which will be effective post-filing of the court order with the Registrar of Companies with an
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appointed date of April 1, 2009. This would mean that Idea Cellular Towers Infrastructure Ltd or
ICTIL in short, will merge with Indus and cease to exist as a separate legal entity. The merger will not
have any significant impact on the consolidated financials of the company. However, in Idea’s
standalone financials the annual IRU revenue of Rs. 1.42 billion will get reduced from revenue and
EBITDA. The reduction in EBITDA will be largely offset by reduction in depreciation, and hence at an
EBIT level the impact on Idea standalone financials will be marginally negative.
With this, I will hand over the call back to Inba and open the floor for questions. Thank you.
Moderator: Thank you very much sir. Ladies and gentlemen we will now begin the question and
answer session. Our first question is from Sachin Salgaonkar of Goldman Sachs. Please go ahead.
Sachin Salgaonkar: I have three questions. Firstly, wanted to understand why despite curtailing
freebies voice revenue per minute declined slightly on a QoQ basis? Secondly, could you provide
the reason for strong minute growth, i.e., was it completely driven by your existing subscribers or
also some MoU market share gain was possible with smaller telco shutting down operations? And
thirdly, if any color you could provide in terms of how revenue per minute and MoU you are
trending in the month of April, that would be helpful?
Himanshu Kapania: There is no doubt, there is lot of interest in improvement of tariff and we are
also keen that the overall tariff should be improved, but we have to realize, as stated earlier, that
there are two businesses within the overall Idea portfolio, one is our 13 established circles and
second is our 9 new circles. The new circles obviously operate at a slightly lower tariff than the Idea
established circles. The proportion of MoU if you noticed in this quarter has been higher from the
new circles than from our established circles. This is one of the factors, even though there have
been certain rate improvements in the new circles, but because the proportion of low realisation
circle is going up the overall voice realization is more or less flat.
The second factor is that in the last two quarters, we had seen a high growth in our ILD as a
percentage and ILD rate realization is multiple times of local rate realization. However, this time
the growth has been more from our own on-net businesses. So in a short, what we are
experiencing is that the nature of consumer location or the type of calling pattern has affected the
rates. We are committed to reduce freebees & discounts in the marketplace and going forward, we
remain hopeful that overall rate realization should go up. We also desire better voice rate
realization and remain focused on reducing the consumer promotions in the marketplace. Having
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said that, the focus of the company always is growth of revenue and we will balance the growth of
revenue through VLR & overall minute growth besides reducing promotions in the marketplace.
As regards second question on strong minute growth, you will notice that for the last three years
Quarter4 is seasonally the best quarter for Idea Cellular. Last year, same quarter we had a growth
of 9.1%, this year we have an 8.5% minute growth. One of the important factor is the kind of
consumers we own, which is higher proportion of rural customers, brings down our minutes in the
Q2 and actually pulls up minute significantly, in the Quarter3 & 4. There is nothing different from
the past year trends and we remain optimistic that this growth will continue into the future. As
regards to April minutes trend I don't have anything significant to report.
Sachin Salgaonkar: Okay sir, this is being pretty clear. One small question I also wanted to ask, is
with respect to your dividend policy, I understand this is the first maiden dividend Idea has given,
but anything you could guide us with respect to any particular dividend policy which Idea wants to
follow?
Himanshu Kapania: While I handover to Akshaya, but I just want to make two comments. You
should keep in mind our retail and institutional investors. This is Idea’s 16th year of operation, and
a token dividend of 3% is only a reconfirmation of the faith the investors have had in the company.
I think, we should read this as the direction the company wants to take into the future. Our overall
desire is share growth and profits with our investors. Obviously you are aware that Idea Cellular is
in investment mode and needs to conserve as much cash to continue making investments, both for
spectrum as well as for capex. I hand over to Akshaya for additional comments.
Akshaya Moondra I would just like to incrementally add that it is difficult to say that we have a
dividend policy at this point of time. The amount of dividend, as Himanshu also said is a token
dividend. It has been decided keeping in mind that given whatever may happen in terms of
headwinds, we should be able to at least sustain this amount going forward.
Moderator Our next question is from Shobhit Khare of Motilal Oswal Securities. Please go ahead.
Shobhit Khare: Two questions from my side. One is that in the past we have talked about the base
effect catching up for traffic growth and this kind of growth might not be sustainable, but we have
added one of the highest additions if I look at the minutes additions, so wanted to get your
comments on specifically, what has caused this, are you surprised by the kind of growth we have
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seen? And second on the industry bases as you mentioned VLR net adds have fallen from almost 9
million average to 3 million average, What do you think is the reason for this and should we expect
this kind of growth going forward in terms of VLR adds for the industry?
Himanshu Kapania: Thank you Shobhit, both your questions are interrelated and I’m going to talk
incrementally to what I had mentioned to Sachin. Besides the topics of the growth of minutes on
account of seasonal trends, there are two other factors, which are actually helping in growth of
minutes and which is sustainable. One factor has been in the last four years we have repeatedly
been talking about that competition in the marketplace increased the phenomena of multi-SIM,
now we are reversing our stand and we are saying that the phenomena of multi-SIM environment
is on the decline. This has happened primarily on account of change in the way now acquisition
takes place in the market place. We are hopeful that this phenomenon will be a permanent rather
than temporary.
There are two changes that took place in the market place helping reduce Multi SIMs, one change
is reducing channel commission. The second change is that acquisition of a new SIM card now
requires a much stricter verification has reversed the trend of replacement of recharge vouchers
with SIM card. The number of consumers now holding multiple SIM cards is declining and the
growth we are seeing now is primarily driven by new users. It is our assessment that last year while
there was 100 million growth in VLR, a large proportion was on account of existing customers
buying more SIM cards, for their dual SIM handsets. All of this is now on the decline. This year,
more growth is happening on account of new subscribers entering the category and multi-SIM
usage, which at some point of time peaked in 2010 and probably up till 2011, is now under decline
which is good for the sector as only new customers are entering into the category.
Shobhit Khare: You mentioned a couple of reasons for voice RPM sort of slightly declining, but if
we remove those traffic pattern than on absolute basis, would our On-Net locals or local minutes
and the realization, is it fair to assume that it has gone up?
Himanshu Kapania: We remain committed to reduce wasteful promotions from the marketplace
and efforts are on. However, we have said in the past, that going forward, you should not put any
drastic upswing into your calculations in terms of tariff increase. It will be a steady and slow rise
rather than step jump.
Moderator: Our next question is from Sachin Gupta of Nomura. Please go ahead.
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Sachin Gupta: Firstly, on the network cost you had quite a big increase in voice minutes and data
traffic, just wondering any particular reason why the network cost is still flat and is that likely to be
the trend going forward? Secondly, your churn as you say has come off quite sharply as well. It is
down to 4% or so now. That is not a bad churn rate for any emerging markets, just wondering is
that the level you are comfortable with or you think you can improve further? And last question, it
is a very general question, I guess, you guys have done obviously a fantastic job in the past 12 to 18
months, how do you ensure that you do stay ahead of the pack going forward as well?
Himanshu Kapania: Let me try to address your second and third question and then I will hand it
over to Akshaya to address the question on network cost. As far as churn is concerned, we are,
both as an operator and an industry, making all efforts to change the business model and we
believe that is in the interest of customers and in the overall interest of the health of the industry
that wasteful expenditures be reduced. We are facing a lot of inflationary costs in terms of diesel
and electricity charges going up and it needs to be counterbalanced with a cost reduction. We, as a
company, really focused, not only on reducing our costs of acquisition of customer but also in
reduction of churn. This remains one of the focus areas for the company, this is a better model
than to disturb the pattern of calling of the customers and charging higher rates from the
customers. However, remember we are only a 15% player in the marketplace and I would not
hazard a guess whether this is sustainable, not sustainable. We will have to observe it for a few
more quarters. We are hopeful that this would be a sustainable trend because this is what should
help revive the industry.
As regards to do we see our performance of doing of about 1.5 to 2x the market pace, sustainable?
Obviously, this is the desire of any company and every brand will talk about it. That is why we now
start talking about classical marketing, shifting away from acquiring mindless customers by huge
amount of discount and driving effort to reduce channel commission, reduce consumer promotions
and to balance this increase effort on building brand equity on a long-term basis & improve our
customer services. Besides the voice market, which is obviously the bread and butter for us, data
remains an extremely important market for us. India still has a single digit penetration on data and
huge potential. We are not competing with the fixed line provider, or anybody who has a hot spot
LTE kind of business. We are focused on mass market data business, data business on mobile and
this is an area of growth. We believe that there is a sufficient room for operators to play in this
arena. I hand it over to Akshaya to talk about network cost.
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Akshaya Moondra: Sachin, I think on the network cost if you will see the trend for any Q3 to Q4,
the network cost as a percentage of revenue goes down and the reason is that when the quarter is
seasonally high quarter, which means the highest volume growth, the capacity utilization also
improves, so the operating leverage kicks in. You will see this trend across board. Also from an
energy cost perspective, Q4 is a seasonally the lowest energy cost because of lower ambient
temperature. I think all this together helps.
Moderator: Our next question is from Reena Verma of Merrill Lynch. Please go ahead.
Reena Verma: Firstly, in terms of the roaming abolition or at least the roaming consultation paper
that’s been floated by TRAI, in the context of that paper, could you share with us, what you think
may be the impact on Idea from a move to abolish roaming charges and what percentage of your
revenues are from national roaming? My second question is on your margins, if we were to add
back the one-time regulatory charge you have taken to EBITDA, your margins have in fact done
very-very well, would you say that would be a right approach to look at margins because you
cautioned us against linear extrapolation, so maybe if you could guide us a bit there, please? And
finally, Mr. Kapania in his opening remarks has said that availability of right priced spectrum
remains a dream. What is the feedback from the government after the failure of the March
auctions, If at all you have had any interactions and what event should we look for now, in order to
expect some kind of policy predictability?
Akshaya Moondra: Reena, on the question of margins, you are right that if that one-off had not
been there, the margins would have increased by more than 2%. Of course this kind of delta
happens when you see large volumes and when we come back to Q2, we all again start feeling that
the industry is showing a very slow growth and our margins are going to decline perpetually. But if
your question is primarily on sustainability, if I just compare Q4 of this year with Q4 of last year and
last few years, the major difference has been that whenever we entered the high season the
customer acquisition cost also went up significantly. I think with the efforts which have been made
from the middle of this financial year, the customer acquisition costs have remained under control
even in the high season. That is the major factor which is actually resulting in very good margins in
this particular quarter compared to what we have seen in the past. As long as the customer
acquisition costs are managed in the same manner, I believe this is sustainable.
Himanshu Kapania: Reena, now your two questions, first starting with roaming – while local mobile
calling are at a lower tariffs, roaming is a premium service. If roaming is going to be moved up
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finally by TRAI or by government, forcing us to reduce prices on premium services invariably there
has to be balancing that will have to be done on local rates. As a company, we are in the process of
filing our response to the consultation paper. Our view has been very consistent that the
Government of India needs to be focused on new subscribers; on inclusive growth, because there is
a need for telecommunication services for lower strata of the society. But having said so, if
government were to insist of bringing down the price for premium services, which is approximately
about 4% of our revenue, then accordingly, there would be a balancing that would naturally
happen. We will have to wait and watch for that and that is why I keep repeating that there are no
line charts that can be drawn in the telecommunication business, adjustments will naturally
happen based on ability of operators and the industry to absorb cost themselves or else invariably
who will bear the cost of bringing down the price for premium service. We believe finally the
consumer has to bear the cost of these regime changes, not the operators.
Moving to the last point of yours; right price for spectrum. You would agree, India is a success story
in the mobile voice telephony side and the success has been primarily on account of high
competition driven by reasonably priced spectrum. India is probably one of the few countries in the
world which has the maximum coverage of mobile services. This was led by significant investment
by operators in their rush to cover maximum land mass and higher Indian population. In case the
government was to revise its original mobile telephony spectrum policy going forward for growth
of broadband services and if they were to follow a policy of high priced spectrum, invariably what
will suffer will be investments on ground or the consumer tariffs. There is no other way the mobile
broadband can be served. If operator has to pay a large component of money for spectrum, the
investment will be slow. This was first experienced in Europe; delayed aggression in 3G for almost 7
to 8 years because of high price paid by operators in 2003 on the auction of spectrum. We continue
to hold the opinion that this spectrum is a key raw material for telecommunication and should be
appropriately priced so that there is sufficient surplus available with operators to make
technological/equipment investments in the marketplace. High speed broadband requires huge
financial commitments, it’s a mass market and India needs a large equipment investment both in
backhaul as well in technology for the 3G and 4G services to reach to the end consumer. India also
needs to support a low priced device. Operators need surplus form operations; in an environment
even the present investment in GSM has not generated acceptable RoI. Shareholders have to make
reasonable return or else the consumers will have to bear the cost of broadband investments made
in the country.
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Reena Verma: Mr. Kapania thank you for sharing your insight, but if I may just persist, my question
is not so much of the desirability of a right price. But are there any events that are happening in
your interactions with the government or what needs to happen for the right price to be agreed
upon? Is there any element of timeline or predictability that you can help bring to that equation,
please?
Himanshu Kapania: In the opening remarks, I had shared the amount of spectrum available and at
current reserve price and our views. There was an opportunity for global telecom companies to get
a high-quality 900 MHz spectrum to enter the country. They have chosen to give it a miss.
Specifically to your gestation, I’m not privy to any information which is not in public domain.
Whatever information that you are aware is the same information we are aware and the current
information is the presently declared reserve price for spectrum auction. It is my personal opinion
that given the quantum of spectrum with the government it is unlikely to be fully sold and it may
take a while for demand to match the supply.
Moderator: Our next question is from Sunil Tirumalai of Credit Suisse. Please go ahead.
Sunil Tirumalai: Firstly, on the data usage numbers that you have been giving out, one strong trend
that we are seeing is that the data ARPU continues to increase quarter-to-quarter, either we look at
just the 3G data ARPU or over all data ARPU that you report and which was quite surprising
because normally when we saw the voice business grow, we had subscriber additions coming in,
along with it ARPU falling. So I’m wondering, are your all customer base, I mean in terms of
behavior, are you seeing a very rapid maturing in terms of usage? People becomes comfortable and
using more of data, upgrading into higher plans or are you seeing newer customers coming in with
smart phones with many of the OEM discounting smart phone in India recently. I just want to
understand on that behavior.
Himanshu Kapania: I don’t agree with your observation. While data ARPU is growing, but the fact
remains on a blended basis data ARPU of Rs. 55, which is $1 for active data users and for 3G data
ARPU of Rs.105; $2 per active 3G users is nowhere near any global standards. Not only among
developed countries, even compared to emerging markets the data ARPU in India is definitely far
lower. You will agree with me that the first level of customers who are entering the category are
the higher end usage customers, they are far more mature mobile customers, they obviously
possess a higher priced device and their ability to pay is far higher. We hold an opinion that there is
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still a lot of potential for growth in data ARPU and $1 per blended basis and $2 on a 3G basis is far
too low and going forward, we are expecting this number to go up.
Sunil Tirumalai: And the second thing that I want to check, Akshaya, what should we look at the
normalized effective tax rate for FY14?
Akshaya Moondra: It will be the same, 33.99%.
Sunil Tirumalai: I also have a question on the interconnect cost and you mentioned about the ILD
traffic slowing down during the quarter. I am assuming that is one of the reasons for the RPM
weakness that you have mentioned, and also on-net calling pattern. I am wondering what could
have driven the change in the behavior just for this particular quarter because in the previous
quarter we had said that ILD calling is increasing, so I am wondering on both these accounts, on ILD
as well as on On-net, what could have driven the change in consumer pattern?
Akshaya Moondra: The On-Net, variation is very small, it is not significant, but it has an impact, so
that is about it. As far as ILD is concerned, we are not looking at customer business, we are looking
at operator to operator business and this market tends to be a bit of spot market where people
keep changing their vendor for a particular service. This is a fairly well-competed market where the
long term commitments are not there, so traffic can move. Last quarter we had a very high level of
growth, some of that growth has gone away but if you will look at two quarters in succession and
the cumulative growth, it would be better than any other revenue stream which is growing in our
company. This is more like a market where the service provider keeps changing over the short-term
and you may see these kinds of movements.
Sunil Tirumalai: But just a follow-up on that, I would assume that you are referring to you selling
ILD wholesale capacity to other operators, is that what you’re referring to?
Akshaya Moondra: Yes.
Sunil Tirumalai: So that would be a reasonably low margin business and if that comes off it is
basically a fixed cost that you are incurring, so the cost over there should not come off just because
you are not able to sell, so I’m just trying to understand on that?
Himanshu Kapania: We did not understand your point of cost. When we do ILD business, it reflects
in IUC charge which is far higher in comparison with domestic business. The wholesale reference
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was on IUC charge on one side, that is from the cost side. The second reference on the rate side is,
while there is a low margin business but the actual rate of ILD is far higher than the absolute rate of
domestic calling. So if we have a very high minute growth in a particular quarter and the growth in
sale of ILD is almost negligible or flat, then you notice this kind of minor trend. It has an impact on
the rate that is what I was trying to tell you.
Akshaya Moondra: What we can confirm is that when you look at a reduced level of pass through
per minute, the ILD variation is the main item which is impacting that. Other than that it is
normally trending.
Sunil Tirumalai: So I was trying to put these two together to understand why the roaming and
access charges as a percentage of sales has come off, I was hoping that this is where I would find
the answer but from what you said this is not a major driver for this?
Himanshu Kapania: We can share some more details on this offline for sure.
Moderator: Our next question is from Srinivas Rao of Deutsche bank. Please go ahead.
Srinivas Rao: I have two questions; one is on your margins I do not refer to your fourth quarter
numbers. Generally speaking your margins have been sustainable and trended up over the last
three quarters and now they are almost up to your levels which we saw in fiscal ‘10 actually. The
question is, generally speaking, during this period your Access & IUC has gone up and your SG&A
has come down, is that unlikely to continue going forward?
Himanshu Kapania: The answer is yes.
Srinivas Rao: In that sense your peak margins have been in the past when we had this whole
competitive activity in the last three years before that particularly your legacy margins went up to
something like 33% odd, is that something which we can look forward to over the medium term by
which I mean in the next let us say two years?
Himanshu Kapania: Before I’m going to hand it over to Akshaya but I will just make two comments.
Comment #1, margins in telecom business is dependent on capacity utilization; if you improve your
capacity utilization you will have better margins. #2, proportion of business from established circles
and new circles. As you may noticed we have had flat loss in the new circles and 13 Established
circles had improved their margins, so it is our endeavor in the long run to be able to make our 9
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new circles profitable. Our margin improvement is now going to be driven primarily by holding our
margins in our 13 establish circles and be able to bring down losses in the new circles. That will take
a little while but that is the direction that we need to work on.
Srinivas Rao: Just one more thing. Your access or IUC charges as a percentage of sales has been
generally trending up over the last 2 to 3 years, what is driving it? Of course you have entered the
ILD business is that something which has impacted or there is something else at play?
Himanshu Kapania: It is primarily ILD and NLD. As I mentioned in my opening comment, our NLD
growth is also faster than overall minutes growth. ILD absolute has grown double and obviously if
you enter a lot of new markets you are bringing in traffic from other operators, then on overall
basis total on-net as a percentage will decline, as IUC or access charges will grow.
Akshaya Moondra: And also the incidence of intra-circle roaming has increased so that is one of
the major contributors.
Srinivas Rao: Second question is on your data realization which has gone up this quarter, is it due
to some mix usage kind of an impact or did you actually manage to raise prices during the quarter?
Himanshu Kapania: We do not like to use the word ‘Raised Prices’ because this creates a lot of
confusion. Having said that, the focus of the company is to reduce wasteful expenses. We have
been reducing consumer promotions. We have been cutting down on unlimited plans. We have
said it before that we are not in the market to sell large chunks of data at very low prices, we really
focused on low- to medium-end consumer, which we believe are far more profitable. That is why
on a per subscriber basis we operate in the 400 to 600 Mb on the 3G site and about 100 to 150 Mb
on the blended 2G plus 3G customer platform. If we continue to remain focused in this consumer
segment, our overall price realization will improve. If we target high end unlimited data user, the
rate realization will naturally falls.
Srinivas Rao: One final question, Telenor had a conference call sometime back, they commented
that because of the change in the regulations which happened in India with respect to registration
and the security check, that has been one driver of multi-SIM kind of phenomena coming down,
but they added that their PoS connectivity is different from what they believe is that of the
competition. Would you like to comment on that? Did you make any changes in the last two
quarters with respect to the government regulations?
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Himanshu Kapania: As I said in my opening remarks stricter verification norms has been
implemented based on new guidelines from the month of November by the industry. Now for
acquisition of a new SIM card, customer has to first get his information verified at the company
level before he can start using SIM, which was not there before November of 2012. I’m not sure
what they (Uninor) were mentioning of a unique to any specific operator. This is an industry wide
practice, a new guideline which has got executed and Idea has implemented the new guidelines.
Moderator: Our next question is from Vinay Jaisingh of Morgan Stanley. Please go ahead.
Vinay Jaisingh: You mentioned 35 billion of capex for next year, I assume that is consolidated. With
a addition of 11 billion minutes this quarter, do you think that number is being understated, that is
the only area where I have a bit doubt. If the traffic growth increases, do you have enough of
capacity to take care of that? That is my first question. The second is on a consolidated basis would
the depreciation, EBITDA or net profit change because of what has happened at Indus?
Akshaya Moondra: Vinay, firstly my comment on capex guidance is always on a stand-alone basis,
that is excluding Indus. If that is the case, does that answer your question that capex is adequate.
Vinay Jaisingh: You have got 15% as capex-to-sales this year, this quarter was 22%, so where I’m
heading is as traffic increases even if it is 40 billion including Indus, isn’t that number a bit too
small?”
Akshaya Moondra: No. Frankly speaking, I am not looking at Indus at all so let us also talk in the
same context. What also happens is that if you see that our capex has been large in this quarter
that means a lot of capacity has also been built up and it will take some time to be utilized. I think
35 billion would adequately cover the kind of growth that we are looking at including making
suitable provisions for the data growth that we are seeing.
Himanshu Kapania: Let me just add to it. Primarily the way to be able to study capex investments
of Idea Cellular is how much headroom do we have in the current investments? To read this you
have to study the revenue per site, minute per site that we currently generate versus leaders in the
marketplace. You will notice that we still have far more headroom available. There is still an
opportunity for us to improve our utilization and as we improve our utilization our margins will go
up. Given the fact that we have more spare capacity at this point of time, headroom is higher, 35
billion is sufficient and we have to invest Rs. 35 bn not only for managing voice and data growth but
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also to make sure we continue to expand our fiber network, our NLD, ILD and Data network. We
have benchmarked our capex as a ratio to sales that of global operators and if we remove the
spectrum component you may find Idea capex spend competitive for the business which is
currently at $4 billion with aspiration to reach $8 billion. Most operators are currently operating
anywhere between 12 to 18% of capex allocation to sales minus the spectrum cost unless the
operator is investing in the technology change. The next big capex spends happens when a new
technology gets introduced but when that does not happen, a 12 to 15% capex as a % to sales is
the right benchmark to operate at.
Vinay Jaisingh: You did mention on Idea as a standalone will have the depreciation reduction and
the IRU reduction, what about on a consolidated basis? It would not make any difference right, at
the EBITDA level?
Akshaya Moondra: That is what I have said that on a consolidated basis it will not make any
difference.
Moderator: Next question is from Rahul Singh of Standard Chartered Securities. Please go ahead.
Rahul Singh : I have just one question left on the data hockey stick which you mentioned. Just want
to get a sense over medium-term more on a strategic level, given that there are going to be 4G
launches in between with players in the pockets including one of the GSM incumbents and most
probably the data rates per Mb will head downwards maybe much more sharply in FY15, which
means that the 2G, 3G capacity might get filled up very fast. Just wanted to get your sense on, in
the medium-term, how do you think Idea is positioned to capitalize on that hockey stick given that
there would be some sort of an ecosystem which will be placed for much higher speeds may be at a
reasonably priced handsets and much cheaper data rates going forward?
Himanshu Kapania: I think you are asking a lot of questions in a single question. With the best of
my abilities I will answer the questions. First and foremost, following are some facts. At a price
point of 30 paisa, I’m just rounding off for simplicity of understanding, 1 Mb is equal to 5 minutes,
so we are actually getting a voice realized rate close to 6 paisa per minute, so this is what a 1 Mb
generates.
Now the belief of the analysts’ colleagues is that the data rates will go down
significantly below that. In our calculation at whatever volumes that we do, Idea does about 11
billion megabits even if we multiplied by 10 times which is the number United States currently does
and if the rates were to fall at whatever ratios you were to take, there is no money to be made in
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the market. We’re not sure why would anybody invest in this business. This is one data point that
we would like to make.
Second data point, is that it is an incorrect assumption that the auction which took place in 2010
where 2300 MHz was sold, is the only 4G launch that is going to take place in India. The entire
spectrum that we hold is capable to support 4G services.
The third point is we welcome arrival of 4G because it is a complimentary service rather than a
competitive service. Across the world all the three technologies live in peace with each other.
Around the world EDGE services continue to grow, so does 3G services, there are currently close to
5 billion users on EDGE, there are close to 1 billion users on 3G and close to 100 million users on
LTE, all of them will live and as an operator as the market environment permits, each grow.
Accordingly, we will introduce latest technology when we believe it has reached an appropriate
phase of its life cycle. Currently India is a laggard market, forget the developed market, even in
South East Asian markets where China and similar countries like Malaysia are showing almost 20 to
30% of service revenues on data, India is behind with only 5 to 8% of data revenue, it will require a
lot of effort from all Indian operators to be able to change this whole demand for data. If you
believe that all this is being made to drop rate and volume elasticity will more than compensate for
the rate drop, we do not agree. What will drive data growth is devices lower entry price, availability
of more technology and ubiquitous availability of technology so that the choice is available to the
customers to use appropriate technology depending on his need. Huge investments need to be
done. There are about Rs. 6 lakh crores that has been spent on setting up voice infrastructure. I’m
not sure that has been really understood. And the quantum of investments is required to get high
broadband penetration in India, will not a small number if all of you really believe that the same
kind of wireless broadband revolution is going to take place as it happened in voice.
Moderator: Thank you. Ladies and gentlemen, due to time constraints that was the last question. I
would now like to hand the floor over to Mr. Kapania for closing remarks.
Himanshu Kapania: Thank you Inba and thank you so much to all our colleagues and friends from
the analyst and media community. Your questions are extremely helpful for the company. Very
incisive questions and they make us think through the full quarter & implement the learning’s in
our operations. Thank you so much for all the good wishes
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Moderator: Thank you very much the members of the management team. Ladies and gentlemen
on behalf of Idea Cellular that concludes this conference call. Thank you for joining us and you may
now disconnect your lines.
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