Churn in telecom: Idea’s loss widens in Q3; gets toppled by Reliance Jio in revenues

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Mumbai/new Delhi | Published: January 25, 2018 6:47:54 AM

Idea Cellular on Wednesday joined Bharti Airtel to get hit on all key financial metrics during the October-December quarter, impacted by the 57% reduction in mobile termination rates as well as competitive pressures brought in by Reliance Jio.

churn in telecom, idea, idea loss widens, Reliance Jio,Reliance Jio in revenues, mobile termination, mobile termination rates Idea Cellular on Wednesday joined Bharti Airtel to get hit on all key financial metrics during the October-December quarter, impacted by the 57% reduction in mobile termination rates as well as competitive pressures brought in by Reliance Jio. (Image: Reuters)

Idea Cellular on Wednesday joined Bharti Airtel to get hit on all key financial metrics during the October-December quarter, impacted by the 57% reduction in mobile termination rates as well as competitive pressures brought in by Reliance Jio. The company, which is in the process of being merged with Vodafone India to be able to face competitive pressures better, reported a wider net loss at Rs 1,352 crore compared with Rs 1,176 crore in the preceding quarter and a 13% sequential fall in revenues at Rs 6,510 crore. The October-December quarter rang in two key changes in the country’s telecom sector. First, Jio posted higher profits at Rs 504 crore than Bharti Airtel’s Rs 306 crore. Second, during this period Jio raced ahead of Idea with revenues of Rs 6,879 crore. Similar to Bharti, Idea said that its revenues and Ebitda were adversely impacted by the reduction in the mobile termination rates which came into effect from October 1, 2017. Idea said that its revenues took a hit of Rs 820 crore and Ebitda of Rs 230 crore. Consequently, Idea’s Ebitda declined 18.5% q-o-q to Rs 1,223 crore, while the Ebitda margins came in lower by 130 basis points at nearly 19%.

Bharti’s revenues due to reduction in termination rates were hit by Rs 1,062 crore and Ebitda by Rs 338 crore. Further, the cut in international mobile termination effective February 1, from 53 paise to 30 paise per minute, will once again hit all operators, but since Jio’s revenues from international calls is lower than Bharti’s, Idea’s and Vodafone’s, it will be less affected than incumbents. Himanshu Kapania, managing director, Idea Cellular, told analysts on a conference call that the impact of reduction in IMT on company’s Q4FY18 revenues and Ebitda for the two months of February and March 2018 is estimated to be about Rs 65 crore and Rs 40 crore, respectively. Despite Bharti, Idea, and Vodafone (which is yet to come out with its Q3 numbers) getting severely bruised by the tariff war started by Jio, the silver lining is that their data and voice volumes are on rise because of the bundled offers, which began with the commercial launch of services by Jio in September 2016.

For instance, Bharti’s data consumption per subscriber during the quarter grew 31% to 5.5 GB QoQ, while Idea’s rose by 24.6% to 4.7GB. However, Jio’s declined marginally to 9.6GB during Q3 from 9.62GB in Q2 FY18. Data volume for Bharti grew 41.1% sequentially to 1105 billion MB, while that of Idea rose 30.2% to 571 billion MB. Jio’s data consumption also rose 14% to 4310 billion MB. Similar was the case with voice. Bharti’s voice traffic grew 13.1% sequentially to 495 billion minutes in Q3. Idea too registered a 11% jump to 283 billion minutes, while Jio’s total voice usage grew a healthy 29.5% to 311 billion minutes QoQ.

Voice usage per customer also showed an uptrend. While Bharti’s rose 11% QoQ to 575 minutes, Idea registered a 10.89% growth at 509 minutes. Jio’s average voice consumption rose by 10.86% to 696 minutes in Q3 FY18. The other positive is that operators have not lost subscribers. At the end of Q3 FY18, Bharti’s data subscribers (3G+4G) grew 12.6% QoQ to 62.15 million, Jio’s by 40.5% to 160.1 million and Idea’s 17.6% to 34.8 million. Even churn was reduced by Bharti and Idea while Jio saw it increasing marginally by 0.4%. With pricing under pressure, obviously average realisation per user (Arpu) went southward. For Bharti the decline was 15.2% QoQ to Rs 123; Idea 13.6% QoQ to Rs 114, but for Jio the fall was less steep at 1.5% (Rs 154).

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