Idea posts surprise profit on tower sale gain

By: |
Mumbai | July 31, 2018 4:30 AM

Idea Cellular on Monday posted a surprise consolidated net profit of Rs 256.5 crore during the April-June quarter due to a one-time gain on the sale of Idea Cellular Infra Services at Rs 3,364 crore.

Idea posts surprise profit on tower sale gain

Idea Cellular on Monday posted a surprise consolidated net profit of Rs 256.5 crore during the April-June quarter due to a one-time gain on the sale of Idea Cellular Infra Services at Rs 3,364 crore. The company had posted a net loss of Rs 962.2 crore in the preceding quarter. In fact, barring the April-June quarter, Idea Cellular had been posting a net loss for the last six straight quarters.

According to Bloomberg consensus estimates, Idea’s net loss during the quarter was pegged at Rs 1,528 crore.

Revenues though were below estimates at Rs 5,889 crore, down 4% quarter-on-quarter as the company battles along with other incumbent operators with below-cost tariffs unleashed by Reliance Jio. As a result there’s been a down-trending of average revenue per user (Arpu). Idea said that during the quarter, the full impact of Trai’s international IUC rate reduction was felt.

With continued customer preference for lower value deep discounted unlimited voice and bundled data plans, Idea’s Arpu declined further to `100, which is lower than those of Bharti Airtel and Reliance Jio. Jio commands a leadership in Arpu with Rs 134.5, while Bharti is at Rs 105.

In a veiled criticism of the competitor Reliance Jio, Idea in a statement said, “Indian mobile industry continued to decline under pressure from heavily discounted unlimited voice and bundled data plans and subsidised 4G feature phone offerings from one of the operator, forcing commensurate response from other existing mobile operators to retain subscribers”.

Consequently, the Ebitda (earnings before, interest, tax, depreciation and amortisation) for Idea got slashed more than half to `659.5 crore, while Ebitda margins tumbled over 1,200 basis points to 11.2% during the quarter.

On other operating metrics too, Idea continues to lag behind both the peers,Reliance Jio and Bharti Airtel. For instance, Idea’s data traffic at 9,92,000 million Mbs is less than half of Bharti’s 21,50,645 million Mbs reported during the quarter and way below Jio’s 65,74,080 million Mbs.

Idea’s data volume compared to the preceding quarter increased by 21%; however growth rate slowed down substantially, because in the preceding quarter it grew 43%. However, continuing its upward trend in data usage per customer, this quarter too, Idea witnessed a sharp 32% increase to 8,000 MB per subscriber versus 28% increase in Q4FY18. Here, however, it has scored better than Bharti’s usage per customer at 7,864 MB per customer.

On total voice traffic, Idea is the lowest in the pack with 349,500 million minutes reported in the April-June 2018 period, while Bharti leads here with 684,191 million minutes followed by Jio at 448,710 million minutes. This is because Bharti’s total user base is the highest at over 300 million, while Jio’s subscriber numbers of 215.3 million are now neck-and-neck with Idea’s subscriber base of 216 million. On its own, Idea has registered an increase of 6% in voice traffic volumes over the preceding quarter.

Consequently, usage per customer of Idea stood at 609 minutes, again much below Jio’s 744 minutes, and Bharti’s 700 minutes. Here too Idea registered a growth of about 6% sequentially.

Meanwhile, the company statement said that with equity infusion of `6,750 crore by Idea in Q4FY18, sale of standalone tower of Idea and Vodafone for `7,850 crore (including `3,850 crore of Vodafone India in Q4FY18), planned equity infusion by Vodafone Group Plc to reduce Vodafone India’s debt, which is in line the with merger agreement and option of monetising Idea’s 11.15% Indus stake available by March 2019, the company has primarily completed this phase of augmenting its long term capital resources.

Last week, DoT (department of telecommunication) had given the approval for the merger of Vodafone India (VIL) and Vodafone Mobile Services (VMSL) with Idea, and now it is in the final phase of merger completion. The combined entity, named ‘Vodafone Idea,’ will be India’s largest mobile operator and the second largest in the world, with nearly 408 million subscribers.

The key focus area for the merged team, the company statement said, will be to fast forward the substantial cost synergies with an estimated NPV of around $10 billion and rapidly expand the broadband coverage and capacity by redeployment of overlapping equipment and refarming /consolidation of spectrum etc. Both the companies currently under ‘active infrastructure sharing’ and ‘ICR (intra circle roaming) arrangements’ are already sharing nearly 66,000 sites.

It further said that the announced merger of Bharti Infratel and Indus Towers is on track with steady progress on regulatory approval. The merger with Indus is estimated to be completed by the end of FY19, giving Idea the option of monetising its stake in Indus.

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