The country’s third-largest telecom operator, Aditya Birla Group’s Idea Cellular, took a hit on all metrics during the October-December quarter this fiscal with the launch of Reliance Jio Infocomm (Jio), whose free voice and data offering has caused major disruption in the domestic market, posting a loss for the first time since its listing in 2007.
Idea reported a consolidated net loss of R384 crore compared to a net profit of Rs 92 crore on a sequential basis. Revenues declined 7% to an “unforeseen level” of Rs 8,663 crore on a quarter-on-quarter (q-o-q) basis. On a standalone basis, which includes all operations, excluding Indus Towers and Aditya Birla Idea Payments Bank, the loss was steeper at Rs 479 crore for the December quarter.
The company’s standalone EBITDA fell to Rs 2,165.5 crore, a steep drop of 23.8%. Its Q3 EBITDA margin of 25% was lower by 5.5% against an EBITDA margin of 30.5% in the July-September quarter, which was adversely impacted by the free offerings of Jio, along with minor effects of demonetisation. Idea said in the last two years, high investments had led to an increase in its depreciation and amortisation charges to R1,965.3 crore and the interest and finance cost (net) to R923.2 crore, which resulted in a PAT loss on standalone basis in Q3 FY17.
The firm blamed the new incumbent operator, Jio, for the impact, adding that the domestic telecom sector is heading towards an annual revenue fall — the first in its history. Idea and Vodafone have already announced that they are exploring a merger option. “The Indian mobile industry witnessed an unprecedented disruption in the quarter of October to December 2016, primarily due to free voice and mobile data promotions by the new entrant in the sector. Consequently, revenue KPIs and financial parameters for all mobile operators have sharply declined, and for the first time in its history, the flourishing Indian wireless sector is trending towards an annual revenue decline of 3% to 5% in FY2017 (vs FY16). The sector can expect to recover revenues only once the new operator starts charging for its pan-India mobile services,” the firm said. Idea has followed the top two telecom operators — Bharti Airtel and Vodafone India — who have reported a decline in performance on all fronts after the commercial launch of Jio. October-December is the first quarter when the full impact of its launch is visible on the domestic market. Idea has followed Bharti to 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. The case is ongoing and the next hearing is on February 20. Analysts said the outcome of the case will be keenly watched as the continuance of Jio’s free services hinges on it. As is known, Jio has extended its free services beyond December 2016 to March 2017.
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 the same price and bundling it with free voice in some packages, which has led to a decline in its voice and data realisation. Its voice average revenue per user fell by 6.6 % to R114, while realisation went down by 10.6% to 29.9 paise, while on the data front, ARPU declined by 14.6% to R111 and realisation by 14.9% to 15.9 paise. For the first time, Idea witnessed a decline in its mobile data customers, which fell by 5.5 million on sequential quarter basis with overall mobile data subscriber (2G+3G+4G) base receding to 48.6 million (vs 54.1 million in Q2 FY17). The contribution of the non-voice revenue, which includes mobile data, to the overall service revenue fell to 27.2% as mobile data revenue contribution declined to 20.2% level. Its net debt as on December 31, 2016, stands at R49,140 crore, including a larger proportion of this debt from DoT under ‘deferred payment obligation’ for spectrum acquired in last four spectrum auctions.