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CLSA cuts Idea’s revenue estimates for FY18 and FY19

By / June 21, 2017 / / 0 Comments

Idea Cellular’s revenue and Ebitda (earnings before interest, taxes, depreciation & amortisation) estimates for FY18 and FY19 have been cut following a sharp 27% fall in the company’s incremental revenue market share in FY17, high contingent liabilities and a hefty repayment burden over the next three years, brokerage CLSA said in a note seen by ET.

The foreign brokerage has lowered the third-largest carrier’s “revenue and Ebitda estimates by 1-7% over FY18 and FY19,” citing incremental revenue market share loss and the likelihood of retaliatory tariff plans amid heightened competition following Reliance Jio Infocomm’s entry.

According to CLSA, while Idea has retained 19% revenue market share (RMS) in FY17, its incremental RMS plunged to 15% from 42% in FY16. Incremental revenue market share is a key performance metric which reflects the portion of increase in industry revenue that directly accrues to the telco.

Incremental revenue market share can be different from a telco’s current revenue market share. If incremental revenue market share is higher than current market share, then the current RMS can rise over a period, but if it keeps falling, it will eventually drag down a telco’s RMS. Idea posted a net loss of Rs 404 crore in FY17 compared with a net profit of Rs 2,714 crore a year ago. Annual revenue fell 1% on-year to Rs 35,575.7 crore.

The full fiscal net loss and revenue dips were the first in Idea’s history since its IPO in 2007. Idea like other incumbents – Bharti Airtel and Vodafone India – was bruised by six months of free voice and data services from Reliance Jio. It was compelled to match its free voice calls and low-priced data offers to hold on to customers and maintain market position.

So much so, unprecedented market disruption by Jio hastened sector consolidation, which saw Idea and Vodafone announce a mega merger earlier this year to create India’s biggest telecom operator. Idea said despite the ‘unprecedented disruption in second half of financial year’ caused by Jio, revenue for both the company and the industry will be back on growth track in the New Year.

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