Idea Cellular’s Q3 loss triples on IUC cut, Jio tariff war
New Delhi: Idea Cellular Ltd said quarterly loss more than tripled to Rs1,285.6 crore as the nation’s telecom regulator halved interconnection fees and a tariff war sparked by new entrant Reliance Jio Infocomm Ltd showed no signs of abating.
The loss for the quarter ended 31 December was in line with the Rs1,280 crore average forecast in a Thomson Reuters survey of analysts.
Idea Cellular, which is set to merge with the Indian unit of Vodafone Group Plc, reported a loss of Rs385.6 crore in the year-earlier quarter.
The cut in interconnection usage charge (IUC) reduced Idea’s revenue and earnings before interest, tax, depreciation and amortisation (Ebitda), an indicator of operating profitability, in the December quarter by Rs820 crore and Rs230 crore, respectively, the company said in a statement.
The Telecom Regulatory Authority of India (Trai) cut IUC to 6 paise a minute from 14 paise effective 1 October.
The telecom regulator’s decision to slash interconnection rates—levied by mobile networks for handling incoming calls from rival networks—has worsened the financial health of an industry that is already reeling from a bruising price war triggered by the entry of Reliance Jio, backed by India’s richest man Mukesh Ambani, in September 2016.
“Clearly, IUC cut has hit the company. The numbers are weak and this is expected to continue for the next few quarters. Jio’s price war is still on and Idea will continue to see downtrading in its ARPU (average revenue per user),” a telecom analyst said on condition of anonymity.
Idea’s bigger rival Bharti Airtel reported a 39% fall in December quarter profit to Rs306 crore. Reliance Jio, on the other hand, benefited from the IUC cut as more calls originate from its network than terminate, and reported a profit of Rs504 crore in the December quarter, a first for the company, from a loss of Rs271 crore in the preceding quarter.
Idea’s revenue from operations fell by 25% to Rs6,509.7 crore in the December quarter, from Rs8,662.7 crore in the year-ago period.
That is despite the company’s voice usage per user rising by almost a third to 509 minutes in the December quarter from 385 minutes in the year-ago period.
Per-subscriber data usage surged almost seven-fold to 4,742MB from 703MB in the year-ago period.
Ebitda in the quarter declined 44.2% to Rs1,223.3 crore from Rs2,191.7 crore in the year ago period.
Arpu fell to Rs114 in the December quarter from Rs157 in the year-ago period. This is lower than its rivals—Reliance Jio recorded an Arpu of Rs154 while Bharti Airtel posted an Arpu of Rs123 in the December quarter.
“The new domestic mobile termination charge rate and recently announced drop in ‘international mobile termination’ settlement charges effective 1 February 2018 from 53 paisa to 30 paisa per minute, remains a body blow to all operators and reduces investable funds for the critical ‘Digital India’ program,” Idea said in the statement.
To better compete with rivals, Vodafone India Ltd and Idea Cellular announced a merger in March, which has received all regulatory approvals except from the Department of Telecommunications.
The merger, which will create the largest telecom operator in India, is expected to be completed by end-June.
As part of the merger plan, Vodafone India and Idea Cellular had in November separately agreed to sell their respective tower businesses in India, totalling 20,000 towers, to ATC Telecom Infrastructure Pvt. Ltd, a unit of ATC, for Rs7,850 crore.
If the completion of the sale of their standalone tower businesses precedes the completion of the proposed merger of Vodafone India and Idea Cellular, the former will receive Rs3,850 crore and Idea will receive Rs4,000 crore.
Earlier this month, on 4 January, Idea said that its promoters will infuse Rs3,250 crore in the company and the board has constituted a panel to evaluate ways to raise an additional Rs3,500 crore.
Idea’s net debt as on 31 December was Rs 55,781.8 crore, including a large component of debt from Department of Telecommunications under ‘deferred payment obligation’ for spectrum acquired in auctions.
On Wednesday, Idea Cellular shares fell 5.38%, or Rs5.35, to Rs94.05 while the benchmark Sensex ended the day flat at 36,161.64 points.