Ahead of Vodafone merger, Idea Cellular posts Q1 profit on tower sale gain

Revenue declined mainly on account of down-trending of average revenue per user, which stood at Rs 100 as against Rs 105 in Q4FY18

Right ahead of its merger with Vodafone, Idea Cellular Ltd reported on Monday a surprise profit in the first quarter of the 2018-19 financial year, riding on a one-time gain from the sale of telecom towers. The company posted a net profit of Rs 2.57 billion for the quarter ended 30 June compared to a net loss of Rs 8.15 billion in the same period last year. Idea had posted a Rs 9.62 billion loss in the previous quarter. 

During the quarter, there was a gain of Rs 33.65 billion from the sale of Idea Cellular Infrastructure Services. Revenue from operations fell around 27.8 per cent on a year-on-year (YoY) basis during the quarter to around Rs 58.89 billion. On a sequential basis, revenue declined 2.9 per cent. The Ebitda for the quarter came in at Rs 6.6 billion, down 65 per cent YoY. 

ICICI Securities said, "The company reported one time exceptional gain of Rs 33.64 bn related to sale of own towers. Adjusted the same, loss was Rs 17.85 bn much steeper than our estimates of Rs 15.15 bn loss."

The company said in a statement that revenue declined mainly on account of down-trending of average revenue per user (ARPU), which stood at Rs 100 as against Rs 105 in Q4FY18. "The Indian mobile industry continued to decline under from heavily discounted unlimited voice and bundled data plans and subsidised 4G phone offerings from one of the operators," Idea said in a statement.

In fact, Idea Cellular reported the lowest ARPU among the other telecom majors for the Q1FY19 thanks to its largely rural customer base. Reliance Jio's ARPU was Rs 134.5, Bharti Airtel's Rs 105 and Vodafone's Rs 102. 

"Idea Cellular’s Q1FY19 performance was very weak on account of steeper than anticipated decline in ARPUs and muted subscriber addition on overall basis as well as data subscriber additions, is concerning," said ICICI Securities. 

Telecom majors are locked in price wars and continue to see a downward trend in ARPUs. Analysts expect the trend to continue in the coming quarters. 

The silver lining for Idea was that during the quarter under review, the voice volume usage was up 5.8 per cent quarter-on-quarter (QoQ) at Rs 349.5 billion minutes, while the data volumes for the quarter was up by 24.5 per cent QoQ. 

Idea's rival Jio posted a Rs 6.1 billion net profit during the quarter, up 20 per cent sequentially, and also reported the highest ARPU in the industry. Jio's ARPU too, however, fell marginally from Rs 137 in Q4FY18. Reliance's telecom arm, however, saw the revenue jump 13.8 per cent sequentially beating street estimates. 

Bharti Airtel reported a consolidated net profit of Rs 970 million for the June quarter (riding on an exceptional gain of Rs 5.15 billion). For its India operations, Bharti Airtel reported a net loss of Rs 9.4 billion. 

Idea is in the last leg of merging with Vodafone India Ltd, and together they will create India's largest telecom player and the world's second largest with nearly 408 million subscribers.