reported consolidated quarterly loss
of Rs 384 crore in the December quarter, a first since its listing in March 2007. While the company posted a net profit of Rs 659 crore in the year ago quarter and Rs 91 crore in the September quarter, a pricing war following Reliance Jio’s free trial offer led to the losses in the last quarter.
Analysts did not have high hopes from the December quarter results
and had pegged the loss
at Rs 403 crore. A 53 per cent rise in other income to Rs 44 crore helped to soften the blow from the poor revenue performance. The doubling of finance costs to Rs 966 crore (higher debt due to spectrum purchase) and a 28 per cent increase in spectrum depreciation and amortisation expenses did not help. At the standalone level (excluding Indus Towers), the company reported a loss
of Rs 479 crore.
The company did not match the low expectations both at the revenue and the operating profit levels. Consolidated revenues at Rs 8,662 crore were four per cent lower than the year ago quarter and seven per cent lower than the September quarter. The Bloomberg consensus estimates had pegged the same at Rs 8,892 crore.
Lower revenues was due to price undercutting which impacted realisations for the voice as well as the data businesses. To retain its customers, the company offered attractive discounts which led to voice rates falling by 11 per cent sequentially to 29.6 paise per minute while average revenue per megabyte saw a steeper 15.2 per cent to 15.9 paise. Bharti Airtel did better as India voice realisations fell nine per cent, while data realisations were down 11 per cent on a sequential basis.
The fall in realisations was not compensated by volumes. Voice volumes grew 7.3 per cent with a larger contributions coming in from incoming calls, especially RJio customers which grew in double digits. While its average voice realisations is at 29.6 paise, it gets paid interconnect usage charge of 14 paise per minute which is less than half its overall voice realisations.
The cuts in the data segment hurt more. While the company added 5.6 million voice customers in the quarters, in a growing data market, it lost 5.5 million data customers on a sequential basis. Despite the sharp data price fall, volume growth, which a few quarters ago used to double, has now come down to a crawl. Overall data volumes grew just 1.3 per cent over the September quarter. Fall in data realisations also translated to average revenue per user for data falling 15 per cent to Rs 111.
The management indicated that the sector can expect to recover revenues only once the new operator starts charging for its pan-India mobile services.
The company’s operating profit at Rs 2,165 crore was down 24.3 per cent on account of higher network costs and subscriber acquisition/promotion expenses. This was below expectations which pegged it at Rs 2,385 crore. Declining realisations and higher costs led to a 550 basis points dip in margins to 25 per cent.
The markets will keep an eye out for what will happen when RJio’s extended free offer comes to an end in March and any announcement is made on the proposed merger between Vodafone and Idea.