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Idea Cellular posts first-ever loss due to Reliance Jio impact

Idea Cellular reported a loss of Rs 479 cr for the October-December quarter, hit by Reliance Jio’s free offerings, the first loss in last 40 quarters since its IPO in 2007.

“The Indian mobile industry witnessed an unprecedented disruption in the quarter of Octoberto December 2016, primarily due to free voice & mobile data promotions by the new entrant in the sector.. As a result of this current industry upheaval, the standalonelcea revenue dropped to an unforeseen level at Rs. 86,627 million, a decline of 6.9% on sequential quarterly basis and standalone EBITDA fell to Rs. 21,655 million, a steep drop of 23.8%,” said the company.

The O3FY17 EBITDA margin 25% is lower by 5.5% against EBITDA margin of 30.5% in O2FY17, impacted by the free offerings of new operator along with minor effects of demonetisation.

In an effort to retain its existing mobile subscribers, Idea was forced to reduce on sequential quarterly basis its voice rates by 10.6% to 29.6 paisa per minute versus 33.1 paisa in the previous quarter, and drop its mobile data rates) by 15.2% to 15.9 paisa per megabyte from 18.7 paisa in O2FY17.

“Despite an unprecedented outgoing voice rate fall, the lure of free offerings resulted in lower than normal volume elasticity with the quarterly sequential voice minutes growing only by 7.3% to 210 billion minutes, that too led by double digit growth in incoming call volume,” it said.

The higher blended voice realisation rate fall was also an outcome of the flood of minutes terminating on the company’s network from Reliance Jio, resulting in overall higher ratio of subsidised incoming minutes recovered at below cost IUC settlement rates.

The impact of free promotions was even more pronounced on mobile data business.

Idea, for the first time, witnessed a decline of 5.5 million mobile data customers on sequential quarter basis with overall mobile data subscriber (2G+3G+4G) base receding to 48.6 million (vs 54.1 million in O2FY17).

In spite of a massive mobile data rate drop of 15.2%, mobile data volume elasticity was negligible as overall mobile data volume grew only by 1.3% quarter on quarter to 108.8 billion megabyte, though the per subscriber data usage grew marginally to 703 megabyte against 694 megabyte in O2FY17.

Consequently, the data ARPU per data subscriber (2G+3G+4G) fell to Rs. 111 against Rs. 130 in O2 FY17.

The “Non Voice Revenue’ contribution to the overall service revenue fell to 27.2% as mobile data revenue Contribution declined to 20.2% level.

Separately on voice subscriber addition, the telecom player withstood the unprecedented attack by new entrant, adding a healthy 5.6 million new switched on customers during the quarter taking the VLR subscriber EoP base to 192.1 million as on 31 December, 2016.

“In spite of short term challenges, Idea remains committed to the process of building world class mobile broadband Services.. The company is gearing to offer ‘Pan India wireless broadband services (3G and/or 4G) by March/April 2017 in all 22 telecom service areas from existing 17 service areas,” it said.

Over the last two calendar years (2015 & 2016), idea has expanded its telecom infrastructure by 69% adding 95,302 network sites (2G-3G+4G), including nearly quadrupling its Wireless Broadband sites (3G+4G) from 27,744 in O3FY15 to 1,00,615 in O3FY17.

The wireless broadband population under coverage now reaches to nearly 500 million Indians in 17 Service areas.

During the same two years, the company has also increased its Fibre network by nearly 50% from 90,200 km (O3FY15) to 133,800 km in O3FY17.

Idea’s overall spectrum holding of 891.2 MHz across 900, 1800, 2100, 2300 & 2500 MHz, equips it with the ability to roll out Broadband Networks which can carry 15-20 times of current mobile data traffic, it said.

The net debt as on 31 December, 2016 stands at Rs. 491.4 billion, including a larger proportion of this debt from DoT under “Deferred payment obligation’ for spectrum acquired in last four spectrum auctions.

In O3FY17, the company’s capex spend was Rs 20 billion (excluding forex & interest capitalisation), partially funded by cash profit of Rs. 12.3 billion.

Idea’s vast network of 2,32,977 sites (132,362 2G sites, 66,661 3G sites, 33,954 4G sites) and 133,800 Kms of fibre now offers its GSM services to over 1 billion Indians across 4,00,000 towns and villages.

Further, the company’s mobile broadband services are now available to around 500 million Indians across nearly 1,00,000 towns & villages in 17 service areas.

The operator added 9,009 4G sites during the quarter, reaching 33,954 4G sites, covering 37.6% of population (211 million Indians) spread across nearly 19,000 towns and villages in 11 service areas.

Additionally, in O3FY17, the company expanded its 3G network by 6,194 sites reaching overall 3G sites count to 66,661.

Idea’s own 3G services covers 57.2% of Indian population (395 million) spread across 89,000 towns and villages in 13 service areas. The company is gearing to expand its 3G services to 15 service areas on its own Spectrum with slated launch of 3G services in Rajasthan & Bihar telecom circles by March/April 2017.

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