Idea Cellular slashed its employee costs by nearly 40% in the three months from January to March this year, and also reduced several other items of expenditure in a successful attempt to protect its margins from the impact of falling revenue.
As a result of the heavy cost cutting ahead of its merger with Vodafone, the company was able to decrease its operating costs by 619 cr, or 7.2%, to 8,000 cr compared to the previous three months.
This helped the company withstand the decline of 372 cr, or 5.7%, in its service revenue during the same period.
As a result of these cuts the company’s loss before tax fell to Rs 1,538 cr from Rs 1,985 cr in the previous three months.
At the net level, the loss fell to 962 cr from 1,285 cr.
The exact reason for such a huge decline in its employee expenses — from Rs 424 cr in Oct-Dec to Rs 260 cr in Jan-Mar — was not clear. It could be because of the sale of a large number of its towers, as well as preparations for the merger with Vodafone.
It was also able to reduce license and spectrum charges paid to the government from 699 cr in Oct-Dec to just 533 cr in Jan-Mar.
Similarly, marketing and advertising costs were cut from Rs 905 cr to Rs 817 cr.
Service revenue fell to Rs 6,137 cr from Rs 6,510 cr in the preceding quarter and Rs 8,126 cr a year ago due to the impact of competitive pressures on its pricing.
During Jan-Mar period, Idea Cellular was able to generate only 13.4 paise per minute of voice traffic carried on its network, a fall of 20% from the preceding October-December period. Compared to last year, the decline was nearly 50% from 25.9 paise per minute.
Data prices fell even faster, declining 30% to 1.4 paise per MB, or about Rs 15 per GB, from Rs 21 per GB three months earlier. A year ago, Idea was charging around Rs 120 per GB.
However, the company’s revenue from the sale of data services actually remained unchanged at around Rs 1,145 cr compared to about Rs 1,143 cr in the December-October period.
However, compared to a year ago, there was a definite decline in the revenue it was able to generate from data services.
In the same quarter of last year, it was able to generate around Rs 1,461 cr from data services, indicating a decline of 22% over the last one year.
The yearly decline in data revenue, however, is less than the 24.5% decline in the company’s overall service revenue during the period, indicating that voice and other value added services have sustained an even bigger hit.
For example, the company generated around Rs 5,992 cr from selling voice services during the same quarter last year. This year, the number fell to Rs 4,427 cr — a fall of 26.1%.
This is because data has shown greater ‘elasticity’ in demand compared to voice. In other words, people have shown a greater willingness to consume more data with falling prices, compared to voice.
Despite the impending merger, which the company said it expects to complete in the next two months, Idea continued to roll out new broadband towers.
During the quarter, Idea put up 11,345 broadband sites, most of which were 4G.
The total site count stood at 1.31 lakh for 2G and 1.55 lakh for broadband.
It has over 1.57 lakh km optic fiber, in comparison to over 1.44 km a year back.
Total money spent on expansion and other capital projects was Rs 2,110 cr during the last three months, taking the total for the year to Rs 7,000 cr. In comparison, Bharti Airtel spent Rs 23,500 cr in India.