Idea’s key operating metrics remain weak

Even though Idea Cellular has surprisingly reported a net profit of ~2.57 billion for the June quarter due to a one-time gain from the sale of its tower assets, key performance metrics of the company remain weak.

The Aditya Birla Group company, which will soon be merged with Vodafone India, has seen deterioration in revenues, operating profit, margins and average revenue per user (ARPU).

In fact, its ARPU of ~100 is the lowest in the industry as compared to ~102 of Vodafone, ~105 of Bharti Airtel and ~135 of Reliance Jio.

Analysts say that it will be very difficult for Vodafone Idea Ltd ( name of the merged entity) to improve margins in the hyper competitive market. According to a report by Credit Suisse, in a worrisome trend, 3G/4G subscriber base of Idea Cellular has stagnated, with just 1.1 million net increase quarter-on-quarter (Q-o- Q) against monthly run-rate of 3 million for Bharti Airtel and 9 million for Reliance Jio.

Also, Idea registered a capex of ~9.8 billion in 1Q19, which is negligible compared ~78.7 billion incurred by Airtel and ~175 billion by Jio during the same period.

During the quarter, there was a gain of ~33.65 billion from the sale of tower assets. On a sequential basis, revenue declined 2.9 per cent. The Ebitda for the quarter was ~6.6 billion, down 65 per cent year-on-year.