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Idea posts net loss of Rs 930.6 crore in Q4FY18, blames hyper-competition and regulatory headwinds

Idea Cellular has reported a net loss of Rs 930.6 crore in the last quarter of the financial year 2017-18 (Q4FY18), which is an improvement from last quarter’s loss of Rs 1285.6 crore. This was helped by lower costs and a higher income from other sources. For context, Idea’s loss this quarter is still significantly higher than that of the corresponding quarter last year (Q4FY17) when the loss was Rs 325 crore. Revenue for the telco slumped to Rs 6,137.3 crore in Q4, down from Rs 6,505 crore in Q3.

This comes on the back of a financially stressed telecom industry, where a price war among top players has led to reduced earning and ARPUs (average revenue per user).

In a press release, Idea said, “The Indian mobile industry witnessed another year of hyper-competition as well as high regulatory headwinds. The super aggressive price plans including the deep discounted unlimited voice bundled data plans, offered by most of the incumbent operators to retain existing subscribers against abysmally low priced plans offered by new 4G operator, exploded the voice and data volume growth multi-folds.”

Speaking of past trends, Idea also wrote that the telecom industry’s AGR (Adjusted Gross Revenue) fell by nearly Rs 322 billion in 2017 as compared to 2016, a 21.7% dip. The telco said it had the lowest drop in AGR revenue market share from 20.0% in 2016 to 19.5% in 2017, among the top 3 industry operators.

Another reason for the industry’s stress is the change in regulatory policy, Idea said. TRAI has reduced the mobile termination charges and international mobile termination settlement charges any Indian operator can levy, which has led to a further loss of revenue.

“However, these trends are not reflective of the emerging long-term opportunities offered by the sector,” Idea added. It pointed out to the industry’s consolidation among three large private operators, multi-SIM holders changing their usage to a single operator, subscribers are upgrading to higher broadband usage and the space for user expansion (300-400 million people are yet to be connected) in rural areas as opportunities of growth in the sector.

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Usage Trends

  • Idea added 6 million subscribers overall in Q4FY18.
  • ARPU stood at Rs 105 for this quarter, down from Rs 114 in Q3FY18.
  • Voice minutes for Idea grew by 16.9% this quarter as compared to the 10.8% growth in Q3FY18. This was the telco’s highest ever sequential quarterly growth because of higher adoption of unlimited bundled plans.
  • At the same time, voice rate (a monetary metric) fell by 20% from the last quarter to 13.4 paise per minute.
  • Overall mobile data volume grew by a whopping 43.2%, with 818 billion MBs of data being carried by the network this quarter.
  • Following the trend, mobile data rate declined by 31.4% to 1.4 paise per MB this quarter, down from 2 paise per MB in Q3FY18.
  • The EBITDA for the quarter stands at Rs 1,447.3 crore.

Merger Update

The merger of Idea with Vodafone, which was announced last year, is in the final leg of regulatory approvals and is expected to complete in the first half of this year (roughly by June-July). Both companies currently share around 49,000 sites under their active infrastructure sharing programme and 2G & 4G intra-circle roaming arrangements. Planned Fibre and PoP sharing programme is also underway in top 220 cities across the 22 telecom service areas, Idea said. The two companies had announced the leadership team of their merged entity in March.

You can see the analysis of Idea’s mobile business through graphs here and a detailed report on Idea’s wallet business this quarter here.

Competitor Airtel’s quarterly earnings also reflected industry trends. How that was is explained here and here.

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