Idea Cellular Q3 net loss widens to Rs 12.8 bn; blames IUC rate cut

Lamenting decline in domestic call connect charges, Idea said move along with recently announced drop in International mobile termination settlement charges deals a blow

Idea Cellular on Wednesday posted deeper losses of Rs 12.84 billion (Rs 1,284.5 crore) for the quarter ended on December 31, 2017, and said a "sharp" cut in call connect charges and "unrelenting" rate pressure hit its earnings.

India's third largest telecom operator had registered a loss of Rs 3.84 billion (Rs 383.9 crore) in the year-ago period, according to its regulatory filing.

The revenue from operations came in at Rs 65.1 billion (Rs 6,509.6 crore) for the quarter ended December 2017, almost 25 per cent lower than Rs 86.63 billion (Rs 8,662.7 crore) in the same period the previous year.

"The regulation imposed 57 per cent sharp decline in IUC (Interconnect Usage Charges) settlement rates negatively impacted Ideas Revenue and EBITDA for this quarter by Rs 8,200 million (Rs 820 crore) and Rs 2,300 million (Rs 230 crore) respectively," the company said in a statement.

The statement said that the fall in domestic call connect charges that came into effect from October 2017 aggravated the industry's financial stress. "Therefore, this quarter results are not comparable to the earlier periods," the statement added.

Giving an update on its merger plans with Vodafone India, Idea said that combination is in the final leg of regulatory approval and expected to complete in the first half of 2018.

Lamenting the decline in the domestic call connect charges, Idea said that the move along with the recently announced drop in International mobile termination settlement charges deals "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," the statement added.

Idea said it is in the process of raising up to Rs 67.5 billion (Rs 6750 crore) equity to strengthen combined entities' (Voda-Idea) balance sheet.

It noted that the Board has already approved the issuance of 326.6 million (32.66 crore) equity shares on preferential basis to the promoter group entities for a total Rs 32.5 billion (Rs 3,250 crore). Further, the board has also constituted a committee to evaluate potential routes for raising additional equity capital of up to Rs 35 billion (Rs 3,500 crore) including via Preferential Issue, Qualified Institutional Placement or Rights Issue.

"The proposed capital raising of up to Rs 67.5 billion (Rs 6,750 crore) will reduce Idea's net-debt and as a result, Vodafone net-debt contribution to the merged entity will also be reduced by a commensurate amount," the statement said.

This along with the recent sale of standalone tower businesses of Idea and Vodafone India and the potential monetisation of Ideas stake in Indus Towers, "will augment the long-term capital resources of the combined entity", it added.