RJio impact: Idea posts third consecutive quarterly loss

The company posted a consolidated loss of Rs 815 crore

The steep drop in realisations, both in voice and data, triggered by Reliance Jio led to a third consecutive quarterly loss for Idea Cellular. India’s third-largest telecom services provider posted a consolidated loss of Rs 815 crore, compared with a net profit of Rs 220 crore in the year-ago quarter and a loss of Rs 328 crore in the March 2017 quarter. Consensus analyst estimates had pegged the consolidated losses at Rs 741 crore. At the standalone level, losses came in at Rs 617 crore. The losses increased from Rs 430 crore in the March quarter while the company had reported a net profit of Rs 497 crore in the year-ago quarter. 

In addition to falling revenues, higher costs at the operational level and increasing interest costs dented the company’s bottom line. Given the additional debt on account of spectrum acquisition, interest costs increased 16 per cent year-on-year (y-o-y) to Rs 1,153 crore. 

Weak realisations on data and voice on a high-cost base impacted operating profit margins, which came in at 23 per cent down, 970 basis points over the year-ago quarter, while they were 300 basis points lower than the March quarter. While voice realisations are down 5.8 per cent over the March quarter to 24 paise per minute, the fall in data realisations was a steep 53 per cent to 5.4 paise per megabyte. 

Operating profit in the quarter was down 39 per cent y-o-y. Revenues fell 13.9 per cent on a y-o-y basis from Rs 9,486.6 crore last year to Rs 8,166.5 crore this year. The company blamed the "new entrant" for the upheaval and market aggression which forced Idea to drop tariffs on voice and data plans, resulting in a steep revenue decline.

There is, however, some stability on the revenue front on a sequential basis with the company posting a 0.5 per cent increase in revenues over the March quarter. Users are taking the opportunity of falling tariffs to talk and browse more, boosting volumes for the service providers. While data volumes were up 99 per cent on a sequential basis, voice volumes were up 8.4 per cent.

For the Idea stock, the next trigger is the proposed merger with Vodafone. The merger is awaiting approval from regulatory bodies such as Sebi and the BSE, apart from shareholders. The Competition Commission of India approved the merger earlier this week.