Idea Cellular Posts First Quarterly Loss Since Listing
Idea Cellular reports a net loss of Rs 383.8 crore in Q3
Idea Cellular Ltd. reported its first quarterly loss since listing due to declining revenue and rising costs as it faces intense competition from new entrant Reliance Jio Infocomm Ltd.
The Kumar Mangalam Birla-led company reported a net loss of Rs 383.8 crore in the quarter ended December 2016 against a net profit of Rs 659.3 crore in the year-ago period, according to its filing to stock exchanges.
Analysts tracked by Bloomberg had pegged the net loss at around Rs 403 crore.
Idea Cellular is in talks with Vodafone India Ltd. for a merger to create India’s largest telecom operator, the two companies recently said.
Revenue fell 3.7 percent year-on-year to Rs 8660.7 crore for the third quarter. Revenues also declined by 6.9 percent compared to the second quarter -- known to be a seasonally weak three months. This is the first time Idea Cellular has reported a year-on-year drop in its revenue, since listing.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased by 24.4 percent to Rs 2,165.5 crore from Rs 2,863.5 crore year-on-year. EBITDA margin contracted by 680 basis points to 25 percent, led by higher network expenses, and increased subscriber acquisition and servicing costs.
The revenue and EBITDA numbers were also below the analyst estimates of Rs 8,892 crore and Rs 2,386 crore, respectively.
Finance costs for the company doubled Rs 966.9 crore from Rs 442 crore in the corresponding quarter in the previous year. For the nine months ended December 2016, Idea Cellular had a net debt of Rs 49,138 crore as against Rs 36,401 crore as on September 30, 2016.
In the third quarter, company’s cash profit slumped due to higher operating cost. Cash profit slipped around 37 percent to Rs 1,228 crore when compared to the previous quarter. The company incurred capital expenditure of Rs 2,000 crore in the third quarter, which was partially funded by the cash profit.
Data realisation per megabyte decreased 15 percent to 15.9 paise while voice realisation per minute fell 11 percent to 29.6 paise on a quarter-on-quarter basis. Blended revenue per user fell nine percent to Rs 157, while the data revenue per user fell 15 percent to Rs 111.
Idea added 5.6 million customers in the third quarter to its mobile business, taking the total user base to 192.1 million as on December 31. Though the telecom operator holds 890.6 MHz (megahertz) of spectrum across five different bands in India and can provide 4G (fourth generation) services in 20 circles, 6 percent of its customers chose to discontinue their services.
The Jio Factor
Idea Cellular, in its press release, acknowledged Reliance Jio’s entrance into the Indian telecom space as a reason for the fall in revenue and profits. Pressure will continue to remain on voice and data tariffs at least till the end of this financial year as Reliance Jio’s free offer will continue till March 31, 2017.
The sector can expect to recover revenues only once the new operator starts charging for its pan-India mobile services.Idea Cellular Press Release
Year-to-date, the stock has run up 49 percent, covering up the 48 percent fall in share price in the year 2016. The sharp rally was on the announcement of a possible merger between the company and Vodafone India. Though brokerages consider the merger to be a positive for the company, none of the analysts have changed their rating on the stock.