No plan to sell tower assets; don't need cash: Idea

Below is the transcript of Himanshu Kapania's interview with Anuj Singhal and Latha Venkatesh on CNBC-TV18.Anuj: One big question which everyone has on top of their mind is that recently Bharti Infratel told us that it is open to acquiring towers of Idea and couple of other companies, are you interested in selling and what kind of valuations would you expect?A: Idea Cellular remains focused on growth of its mobility business. We are generating strong EBITDA. In FY14 our EBITDA growth was 35 percent. In the first half when compared to our last year same half we have delivered over 25 percent of EBITDA growth and on a consolidated basis our first half EBITDA is nearly Rs 5,000 crore. So currently we have no need for any cash. So we would like to dispel any speculation as regards to tower sell.Latha: The other big news that has come over the last week or ten days has been that DOT is going to split the spectrum auction, 900-1,800-800 megahertz will be done in February and 2,100-2,300 megahertz will be later perhaps May or June. How will this impact the industry? Will prices go up because you don’t know what happens in May?A: There are a multiple news which is flowing and we like to reserve our comments till there is a final decision at this point of time. As far as we are concerned, TRAI has made a formal recommendation and it has said that the current auction, which is scheduled in February of 2015, primarily has no incremental spectrum available and there is a severe spectrum crunch and it has given 5-6 suggestions to the government to increase the quantum of spectrum. We remain extremely hopeful that few of these suggestions will be executed by the government. So there is one big event as regards to what is the final view government takes and they have sent back some of these recommendation back to TRAI and we would want to see formally what is the response of TRAI.Second is we have to remember that as far as telecom operators whose licenses are due for extension for ten years are in the Supreme Court and court hearing starts at the end of this month and we believe that we have a strong contractual case as well as we have big support from the regulator. So we will wait to see what is the final outcome before speculating on various news flows.

Latha: It is not speculation, it is a worry because if the government doesn’t move fast enough on increase the quantum and the auctions nevertheless go as per schedule, you would be in a tight spot because seven of your circles are coming up for renewal by December 2015 and March 2016, so in 12-15 months it is a bit of a back to the wall situation. You may have to be aggressive in the bidding isn’t it?A: Nine of our circles are coming up for renewals. If the prices go up which is what has happened from 2010 for spectrum, that becomes the new floor for the country and if that becomes the new floor for the country then the PM’s vision of digital growth expanding and getting in new platforms both on 3G for all other top operators to go PAN India. All of us are currently regional as well as have a PAN India 4G and to make sure that currently only 25 percent of Indian consumers have opportunity to access internet from their mobile and if it is to become over a billion people consuming one gigabit of data, current spectrum is not sufficient enough and if it is going to be priced what you are all projecting based on February 2015 pricing then we have to say goodbye to digitisation for the next three-five years. So government has to make all these considerations. I don’t think we have to worry so much about Idea Cellular, it is very capable of taking care of itself. I think we have to take a larger society context.Anuj: What about data pricing? We do believe that even in your last quarter, your data RPM was quite high or higher than the previous quarter, do you sense that the data pricing is moving higher from hereon and pricing will improve over the next two-three quarters?A: We are a company which is a strong believer in growth and the growth comes from three elements. One is subscriber edition, second is volume growth and third is pricing growth. We remain focused on revenue growth specifically on mobile data, there was a price decline in the first half of last year and second half of last year. In the first half of this year, there has been stable pricing on mobile data. I don’t think that is possible in the long run but I believe that the volume growth, which we are seeing of around 125 percent on a year-on-year (Y-o-Y) basis and the revenue growth between 80 percent and 90 percent is quite sustainable. The pattern at which it will happen is very difficult to project whether it will be higher subscriber growth or a uses per subscriber growth or by stable rates that is more difficult to put it.Latha: At the moment your debt is around Rs 11,500 crore, isn’t it? Works to what 1.3 times your EBITDA, what will be your comfort zone in terms of debt because you will have to take a lot of debt for the spectrum auctions, whatever the price, whatever the scenario, it is going to mean more debt, what is your idea of comfortable debt to EBITDA?A: We have approximately Rs 12,000 crore of debt out of this, we have borrowed only Rs 3,200 crore from banks both Indian banks and foreign banks and the remaining over Rs 8,500 crore is government deferred payment liability at this point of time. We have in the last three auctions, spend Rs 21,000 crore of buying spectrum of 159 megahertz approximately and most of our debt is by the government deferred liability. Our assessment is based on cash flows that we are generating, the debt that we borrowed from the bank will be slowly turning nil as the time for payments come up and we will have only in our balance sheet government deferred liability, which will be probably the only company among all operators, which have only government denominated deferred liability payment. We are very comfortable with this, we have sufficient covenants available to be able to go up to what is necessary to grow this company. We have grown over the last five years at 20 percent revenue and 30 percent EBITDA and we are hoping to be able to maintain, we continue to grow twice the pace of the industry and whatever is necessary to be able to spend we will make those necessary expenditures for maintaining this growth momentum.Latha: Re-farming of 900 you would say is your biggest headache immediately?A: I would say that is the unique challenge of Indian telecom companies which is not true for any part of the world. It is very disruptive by nature. We have already offered to the telecom operators that the prices had been established, you will not be able to do auction every year, this is probably the last auction where larger number of licenses will be renewed. Every year there will be 5-6 or maybe less than 10 licenses, how will you carry out auction for such small level, it is better that the prices have been established and we are prepared to make those payments and you can decide to hold auctions altogether of all renewals or you can extend it to 10-years, which was the commitment of the government in 1997-1999 or you can extend for 20 years. All the three options we have given to government, we are very hopeful government will consider the option that we have given.Latha: Very strong data traffic growth bucked up your Q2 numbers, can this be a sustainable rate? What are you expecting in the second half?A: Today the penetration of consumer accessing internet on their mobile is around 21 percent. Out of more than 145 million subscriber base, only 30 million access internet which is very small. The global average is now over 60-70 percent. So a large number of customers are going to enter this category and it is about tip of the iceberg that we have seen. This growth will be at a completely different level going forward.