Reeling under the impact of free services by Reliance Jio, the country’s third-largest mobile operator Idea Cellular on Saturday posted a less-than-estimated loss during the January-March quarter due to a tax writeback of Rs 379.2 crore. The company’s consolidated net loss narrowed to Rs 328 crore against a net loss of Rs 384 crore in the preceding quarter. A Bloomberg consensus estimate of 15 analysts had expected the company to report a loss of Rs 719.5 crore during the quarter.
This is the second consecutive quarter in which Idea has reported losses. During the October-December quarter, it posted a net loss for the first time since its listing in 2007.Revenues during the period declined 6.2% sequentially to Rs 8,126 crore. Its earnings before interest, taxes, depreciation and amortisation (Ebitda) during the quarter, similarly, at Rs 2,196 crore, came in significantly higher than the estimated Rs 1,920 crore.
Without naming Reliance Jio, the company said, “The Indian wireless industry witnessed an unprecedented disruption in the second half of fiscal year 2017 on account of free voice and mobile data promotions by the new entrant in the sector.” It, however, added that with Jio starting to charge for its services, growth is expected to come back in the current financial year, albeit very slowly.
Idea, like Bharti Airtel, has approached the Telecom Disputes Settlement and Appellate Tribunal, where it has challenged Telecom Regulatory Authority of India’s passive approach towards Jio’s free services, which, it contends, is not allowed under regulations.
In a bid to blunt the force of Jio’s free offers, Idea, like other telecom operators, adopted the strategy of offering more data at lower prices and bundling it with free voice in some packages, which led to a decline in its voice and data realisation.
“In an effort to retain its existing mobile subscribers, Idea was forced to reduce on sequential quarterly basis in Q4FY17, its voice rate by 12.5% to 25.9 paise/min (versus 29.6 paise in Q3FY17) as also steeply drop its mobile data rate (ARMB) by 27.6% to 11.5 paise/MB (vs 15.9 paise in Q3FY17).
However, the lure of free offerings by the new mobile operator resulted in lower than normal volume elasticity with sequential quarterly voice minutes growing by 10.3% to 231.4 billion minutes (versus 209.8 billion minutes in Q3FY17). The higher blended voice realisation rate fall was also an outcome of the tsunami of minutes terminating on Idea network from the new operator, resulting in overall higher ratio of incoming minutes recorded at below cost IUC rates,” the company said in a statement. Mobile data customers fell for the second consecutive quarter.
It witnessed a sequential decline of 6.4 million mobile data customers and overall mobile data customer base receded to 42.2 million (versus 48.6 million in Q3FY17). Contribution of non-voice revenue, which includes mobile data, to the overall service revenue fell to 24.9% (versus 27.2% in Q3 FY17), as mobile data revenue contribution declined to 18.3% (versus 20.2% in Q3 FY17).
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“The capex guidance for FY18 is Rs 6,000 crore, an investment earmarked for expanding broadband coverage, increase wireless data capacity with planned launch of 2300 MHz spectrum network and introduction of LTE voice services etc,” Idea said.