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Idea Cellular loses No.3 spot to Jio; Q3 revenue dips 13% to Rs 65 bn

By / January 25, 2018 / / 0 Comments

Telecom major Idea Cellular on Wednesday reported revenue of Rs 65.5 billion in the third quarter ending December, losing it’s third spot by revenue share to Reliance Jio which reported Rs 68.8 billion revenue in the quarter. Idea revenue dropped 12.8 per cent compared Rs 75.1 billion in the previous quarter and Rs 87 billion in the year ago period remaining in line with analyst estimates with losses ballooning to Rs 12.8 billion up from Rs 3.8 billion a year ago.

Reliance Jio reported Rs 68 billion revenue and a profit of Rs 5 billion being the only operator to do so in the past five quarters.

The EBITDA margin for the quarter declined to 18.8 per cent (normalised margin of 19.8 per cent) from 20.1 per cent in Q2FY18 said the company. Bloomberg had pegged revenues to be around Rs 67.13 billion (range 65.50 billion to 69.82 billion).

Like Bharti Airtel, Idea management took a hard stand against the 57 Per cent drop in Interconnection Usage Charge (IUC) which has resulted in sharp impact on revenue and EBIDTA.

Adjusting for IUC impact, absolute EBITDA declined by 3.2 per cent QoQ.

“ The regulation imposed 57 per cent sharp decline in IUC settlement rates negatively impacted Idea’s Revenue and EBITDA for this quarter by “Rs. 8,200 million and “Rs. 2,300 million respectively,” said the company in a note.

According to revenue share Airtel (Rs 107 billion) leads the market followed by Vodafone (Rs 82 billion) and Jio (Rs 68 billion).

The company added that the new domestic MTC rate and recently announced drop in ‘International mobile termination’ settlement charges effective 1st February, 2018 from 53 paisa to 30 paisa per minute, is a body blow to all operators and reduces investable funds for the critical ‘Digital India’ program. “The international IUC rate drop only benefits the foreign operators, with no commensurate benefit to Indian consumers but with significant foreign exchange and revenue loss to the Indian exchequer,” said the company note.

The company’s net debt stood at Rs 557.8 billion as of December 31st.

Idea’s overall subscriber base (VLR) crossed the 200 million milestone and stands at 203 million as on 31st December 2017 with net addition of 7.5 million customers over the last quarter. The average revenue per user (ARPU) came down by Rs 18 to Rs 114 which is a 27 per cent drop from last year.

Idea said it improved its subscriber market share to 19.8 per cent in November 2017 compared to 19.4 per cent in August 2017.

Analysts had already predicted that except for Mukesh Ambani’s new telecom service Jio, no other operator would be reporting profits in Q3. India’s largest telecom operator Bharti Airtel’s net profits fell Rs 3 billion with India wireless revenues falling over the year to Rs 107.5 billion.

Since the launch of Reliance Jio’s services in September 2016 (the services were free till March 2017) incumbent telecom operators have witnessed five consecutive loss making quarters leading up to a brutal price war with each operator trying to better Jio’s prices. Jio on it’s part has said that their rates would continue to remain 20 per cent lower than that of competitors as demonstrated by their recent price changes since January.

However, analysts have reiterated that Jio`s numbers cannot be compared to incumbents given that Jio sales do not include IUC revenue, unlike the rest.

Jio`s ARPU also accounts Prime members whose subscription is valid til March, 2018. Jio`s EBITDA numbers are also not comparable as it capitalizes part of opex as “wireline” opex.

Idea’s EBITDA at Rs 12.23 billion is also just above the interest and financing cost of Rs 11,490 which means the operator will have to be extra careful to avoid a negative cash flow.

Earlier in the week, Jio had announced a number of new plans effective from 26th January which are set to increase daily limit on their plans by 0.5 GB per day. This move is likely to further impact incumbent ARPUs forcing them to spend more on capex.

“Our interactions with incumbent management suggests that their CapEx plans account for a doubling of data usage over a significantly larger broadband subscriber base in the mid-term. Hence we believe it is unlikely that incumbents will calibrate up their capex plans,” said Srini Rao, telecom analyst, Deutsche Bank Market Research in a report.

“While we continue to believe current tariffs are unsustainable for the industry, with Jio’s market share ambitions, tariff pressure is likely to continue in the near term and the sector recovery is likely to get delayed,” said Kunal Vora , Analyst, BNP Paribas Equity Research in a note.

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