1. Reliance Jio impact: Idea Cellular loss in Q2 surges to Rs 1176 cr

Reliance Jio impact: Idea Cellular loss in Q2 surges to Rs 1176 cr

The tariff war in telecom triggered Idea Cellular to report a standalone loss of Rs 1,176 crore for the three months ended September, almost twice of the Rs 617-crore loss in the April-June quarter.

By: | Mumbai | Published: November 14, 2017 7:41 AM
tariff, Reliance Jio, Reliance Jio impact, jio impact, Idea Cellular, Idea Cellular loss The tariff war in telecom triggered Idea Cellular to report a standalone loss of Rs 1,176 crore for the three months ended September, almost twice of the Rs 617-crore loss in the April-June quarter. (Image: PTI)

The tariff war in telecom triggered Idea Cellular to report a standalone loss of Rs 1,176 crore for the three months ended September, almost twice of the Rs 617-crore loss in the April-June quarter. The company had reported a net profit of Rs 91.5 crore in the July-September quarter of the previous fiscal, reports PTI. Heavily-discounted tariffs from RJio continue to impact Indian telcos’ profitability — a trend that started September last year with the launch of free data and voice services by the new entrant. Realisations from data services crashed during the quarter and those from voice also dropped, resulting in a sequential contraction in the EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 290 bps to 20.1%. However, reasonably good volume growth for both voice and data services helped stem the losses. Earlier this month, Bharti Airtel missed Street estimates to report a net profit of Rs 343 crore for the three months to September, down 7% sequentially.

“The operating environment for Indian mobile operators remained challenging with unrelenting pressure on pricing, introduction of GST at 18% (compared to service tax at 15%) and need for large investments to support the exploding data demand,” Idea Cellular said in a statement. Idea’s higher share of rural subscribers, coupled with continued pricing pressure and higher GST slab, had a more pronounced impact on the company’s subscribers and revenue loss, it said. Consequently, revenues declined 8.6% sequentially to Rs 7,465 crore. In comparison, Bharti’s revenues were flat quarter-on-quarter, while the operating profit was up 2.3% sequentially. However, Idea maintained its ‘subscriber market share’ at 19.4% and revenue market share at 18.9%.

The company’s net debt as on September 30, 2017 stood at Rs 54,100 crore, including a large component of debt from DoT under the ‘deferred payment obligation’ for spectrum acquired. Mobile data realisations plummeted by 50% sequentially, hitting 2.7 paisa/MB — it was down to 5.4 paisa/MB in Q1FY18, which itself was a 53% drop. The average realisation per minute for voice also fell by a sharp 10% to 22 paisa/minute as traffic was up only 1.6% to 255 billion minutes. At Bharti Airtel, voice volumes grew 3.6% q-o-q to 437.1 billion minutes. The Idea management observed that with the introduction of unlimited voice and bundled data price plans, the consumption habits of Indian mobility users is undergoing a sea change. “As Indian customers graduate to higher ticket unlimited/bundled plans, the mobile service consumption trends are shifting from ‘snacking’ to ‘buffet’ with marked higher per subscriber usage,” the Idea statement added.

The company recently introduced three pan India mass market prepaid price plans for all its 2G, 3G and 4G handset customers. Higher operating costs related to roaming and access (as outgoing minutes increased) and manpower due to annual increments impacted the EBITDA, which declined nearly 20% on a q-o-q basis to Rs 1,502 crore. Additionally, the depreciation & amortisation charge increased to `2,114 crore and interest and financing costs rose to Rs 1,183 crore as the company continued to aggressively invest in expanding its 4G footprint.

Idea increased its fibre backbone network by more than 50,000 km to 1,50,500 km in Q2FY18. Overall, the company’s gross investment in fixed assets rose to over Rs 1.22 lakh crore, a net addition of Rs 48,600 crore (capex + spectrum) during the last 24 months. The capex spend for the latest quarter stood at Rs 1,970 crore. The company said the merger of Idea and Vodafone India is on track. During the quarter, the company received approval for the proposed combination of Vodafone-Idea from the Competition Commission of India, Sebi and the stock exchanges. The final petition for approval of the scheme of arrangement has since been filed with the NCLT.

Additionally, Idea and Vodafone on Monday said they have agreed to sell their respective standalone tower businesses in India to ATC Telecom Infrastructure (American Tower) for an aggregate enterprise value of Rs 7,850 crore. This is part of the Idea & Vodafone India merger announcement of March 2017 where both the parties had announced their intention to sell their standalone tower businesses to strengthen the balance sheet of the combined entity.

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