Reliance Jio data plan war takes toll, Idea Cellular logs Rs 617 cr loss in Q1

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Published: July 28, 2017 6:21:39 AM

Idea Cellular on Thursday reported a standalone loss of Rs 617 crore for the three months to June, bigger than the Rs 430 crore in the January-March quarter bruised by the tariff war in the sector after Reliance Jio launched free data and voice services last September.

Reliance Jio data plan war, Reliance Jio data plan, Reliance Jio data, Reliance Jio, Reliance, Idea Cellula, Bharti Airtel, Telecom Service Providers, Idea Cellular’s revenues, Idea management, telecom companiesRealisations from data crashed, voice falls too; volumes help reduce loss. (Image: PTI)

Idea Cellular on Thursday reported a standalone loss of Rs 617 crore for the three months to June, bigger than the Rs 430 crore in the January-March quarter bruised by the tariff war in the sector after Reliance Jio launched free data and voice services last September. Realisations from data services crashed during the quarter and those from voice services also dropped, resulting in a sequential contraction in earnings before interest, tax, depreciation and amortisation (Ebitda) margins of 310 basis points to 23%. However, reasonably good volume growth for both voice and data services helped stem the losses. On Tuesday, Bharti Airtel had reported a better-than-anticipated profit of Rs 373.4 crore for the three months to June, down 1.6% sequentially and a fall of 75% year-on-year.

“The financial stress in the mobile sector remains at its peak, post the introduction of aggressive unlimited bundled plans by new entrant forcing other operators to follow. Resultantly, all ‘Telecom Service Providers’ are reporting steep decline in revenues, profitability and cash flows and all but one Indian wireless operator quarterly results are likely to show significant financial losses,” Idea said in a statement.

The company’s net debt as on June 30, 2017, stood at Rs 53,920 crore, including a large component of debt from the department of telecommunications under the ‘deferred payment obligation’ for spectrum acquired. Supported by reasonably good increases in both voice and data volumes, which nearly doubled to 252.8 billion MB, Idea Cellular’s revenues in Q1FY18 inched up by 0.5% to Rs 8,166.5 crore. Bharti’s revenues were flat quarter-on-quarter while operating profit fell 1.3% sequentially. Mobile data realisations plummeted an unprecedented 53%, hitting 5.4 paise per MB. The average realisation per minute for voice also fell by 6% to 24.4 paise a minute, but traffic was up a good 8.4% to 250.7 billion minutes.

At Bharti Airtel, voice volumes grew 10.7 % quarter-on-quarter to 422 billion minutes. The Idea management observed that amidst market aggression, existing operators including Idea introduced similar competitive unlimited price plans. “…these aggressive tariff offerings by Idea, led by unlimited voice and data bundled plans, resulted in steep decline of voice and mobile data realisation rates,” the company noted. Higher operating cost related to roaming and access (as outgoing minutes increased) and network expenses impacted Ebitda, which declined 11.5% on a quarter-on-quarter basis to Rs 1,875 crore.

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Additionally, the full-quarter impact of spectrum acquired by Idea in October 2016 resulted in depreciation and amortisation charge increasing to nearly Rs 2,068 crore and interest and financing cost rising to about Rs 1,154 crore. In Q1FY18, the company received dividend of close to Rs 2,66 crore from Indus. “The upheaval in the Indian wireless industry continued in Q1FY18, despite the new entrant slowly migrating from ‘Free Services’ to ‘Paid Services’ but with heavily discounted unlimited voice and data pricing plans,” it said.

Capex spend for the quarter was Rs 1,170 crore, mainly funded by cash profit of about Rs 961 crore. The company maintained its capex guidance for the current financial year at Rs 6,000 crore.

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