Jio shadow on Idea financials

Telco reports loss for second consecutive quarter as revenues drop to ~8,000 cr

An intense tariff war initiated by Reliance Jio since its commercial launch on September 5 last year has dented Aditya Birla Group’s Idea Cellular’s revenues for a second consecutive quarter.

For the quarter ended March this year (Q4FY17), its revenues fell to an “unforeseen level” of ~8,126 crore — a sequential quarterly decline of 6.2 per cent. This was the second quarter of decline in revenues for Idea.

Its consolidated loss for the quarter was ~328 crore. The company had posted a profit of ~452 crore in the same period a year ago. Idea’s standalone losses were higher at ~430 crore, not accounting for revenue from its towers business.

This performance, however, was better than Street estimates, which had expected far higher losses.

The company, which has announced a merger with Vodafone India making the merged entity the largest telecom operator in the country, viewed the October-April period as particularly harsh.

For the October-December 2016 quarter, Idea has posted its first-ever consolidated net loss of ~383.9 crore, compared to a net profit of ~659.4 crore in the yearago period.

“The Indian wireless industry witnessed an unprecedented disruption in the second half of financial year 2016-17 on account of free voice and mobile data promotions by the new entrant (Jio). The October-April interval can be best described as a period of telecom discontinuity, permanently changing mobility business parameters,” Idea Cellular said in a statement.

It said it was able to hold on to its Ebitda (earnings before interest, tax, depreciation and amortisation) at ~2,196 crore, due to cost optimisation and forex gains. Its Ebitda margin was 27 per cent in Q4, up 200 basis points sequentially.

For FY17, its revenue declined one per cent to ~35,575.7 crore. It made a loss of ~399.7 crore in FY17, compared to a profit of ~2,728.1 crore the previous year.

Last week, India’s largest telecom operator, Bharti Airtel, reported its March quarter profit, the lowest quarterly growth in the past four years.

Idea said it had a few tricks up its sleeves to take on the competition. It had reduced its average voice rate by 12.5 per cent to 25.9 paise a minute, compared with 29.6 paise in Q3FY17.

It also reported a steep drop in its average mobile data rate — 27.6 per cent — to 11.5 paise per MB, compared to 15.9 paise in Q3FY17.

But despite lower rates, customers made fewer calls on the Idea network leading to lower growth in billing minutes.

“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 (interconnection usage charges) rates,” the company said in a statement.

Its data business also suffered from a sequential quarterly decline: 6.4 million customers stopped using its mobile data services. In Q3, it had lost 5.5 million customers. Idea’s overall mobile data customer base fell to 42.2 million. In Q3FY17, Idea had 48.6 million customers using its mobile data services.

The mobile data volume elasticity was negated by massive drop in mobile data rates of 27.6 per cent, though overall mobile data volume grew by 16.7 per cent (over Q3FY17) to 127 billion MB.

The company, however, sounded a note of optimism. It said it was “optimistic of a revival in mobile data subscriber addition and data revenue in FY18, as wireless broadband prices become more affordable for higher adoption by the masses across socioeconomic and geographic segments.”