Advertisements for Vodafone India Ltd. and Idea Cellular Ltd. are displayed on a street in Mumbai, India (Photographer: Dhiraj Singh/Bloomberg)

Idea Cellular Q4: Net Loss Narrows On Higher Margins, Other Income

Idea Cellular Ltd.’s losses narrowed during the January-March period led by better operational margins and a six-fold jump in other income, beating street estimates. But this was also the sixth straight quarter when India’s fourth-largest mobile services provider reported losses amid lower tariff pressure by rival Reliance Jio Infocomm Ltd.

The net loss dropped to Rs 962 crore compared to Rs 1,285 crore reported in the December-ended quarter, according to an exchange filing by the company. This was less than the Rs 1,459 crore loss expected by analysts tracked by Bloomberg.

Earnings before interest, tax, depreciation and amortisation rose 18 percent to Rs 1,447 crore, while Ebitda margins expanded to 23.6 percent from 18.8 percent. While analysts expected Ebitda to contract, it could have risen because of a one-off pre-merger-closure adjustment, brokerage reports, including one by Kotak Equity Research, had said earlier.

The company reported other income jumped to Rs 250 crore from Rs 42 crore in the previous quarter.

Revenue fell 5.7 percent to Rs 6,137 crore, lower than estimates of Rs 6,209 crore. For the financial year ended March 2018, net debt stood at Rs 52,330 crore.

The loss for the full financial year swelled to Rs 4,139.9 crore from Rs 404 crore in 2016-17. Revenue from operations came in at Rs 28,278.9 crore in 2017-18 from Rs 36,676.8 crore in the previous financial year.

The company continued to get hurt from the the aggressive price war triggered by Mukesh Ambani's Reliance Jio since its launch in 2016 and blamed the hyper competition for the financial stress in the telecom sector in a post-earnings statement.

“The TRAI (Telecom Regulatory Authority of India) led regulation changes, including reduction of domestic Mobile Termination Charge from 14 paisa to 6 paisa per minute and ‘International mobile termination’ settlement charges from 53 paisa to 30 paisa per minute further aggravated the financial stress for the existing industry operators.
Idea Cellular Statement

Incumbent operators had to offer “abysmally low-priced plans” in an attempt to retain their customers from switching to Jio, it added. That also meant a sharp decline in average revenue earned per user, a key metric for telecom profitability. Idea's ARPU fell by 8 percent to Rs 105 per month.

Road Ahead

Idea has now been in losses for the last six quarters but it has managed to hold market share at just over 17 percent, the same level it was before Reliance Jio's entry in September 2016, it said.

The trend seen in Indian telecom in 2017-18 is not reflective of the long-term opportunities, it said. It is banking on multi SIM users to consolidate their usage to a single operator. It added that India's large rural population of over 300-400 million still remains untapped and that is a huge opportunity.

Vodafone Merger

The company has planned a merger with Vodafone India. The merged Idea-Vodafone entity will have highest subscriber base of 41 crore accounting for over 35 percent market share and second largest spectrum holding of 1,850 megahertz in the country. That deal is “in the final leg of regulatory approvals” and is expected to be completed before July this year, according to the release.