Airtel, Idea, RCom report fourth quarterly declines in Q2FY18 as Jio launches new offers

Key Highlights

• The operator's revenue per user has been falling since Q2 FY17.
• Idea, Airtel and Vodafone have now revised tariff plans to include free outgoing calls on roaming.
• TRAI introduced IUC cut to 6 paise from October 1, 2017.

The telecom sector continued its bleeding streak with Aditya Birla Group telecom arm, Idea Cellular that posted a larger than expected second quarter loss on Monday.

The operator’s loss widened to Rs 1,107 crore in the quarter ended September 30, 2017. This was the company’s fourth straight loss after the launch of Reliance Jio Digital services in September 2016.

Revenue from operations also dropped 20% to Rs 7,466 crore in Q2.

Shares of the company fell over 3% intraday on BSE Sensex as the company announced American Tower Corp would buy Idea’s Indian tower business for $1.2 billion.

The deal is estimated to add nearly 20,000 communications sites to Idea’s existing Indian portfolio, the company said. Vodafone and Idea will receive service level and process efficiency benefits and ATC TIPL will secure certain preferential rights for future new business commencements on its existing portfolio and on the sites being acquired in certain Indian markets.

It is expected to generate Rs 2,100 crore in property revenue and Rs 800 crore in gross margin during their first full year in American Tower’s portfolio, at current exchange rates, the company added.

Idea’s revenue per subscriber (ARPU) fell by 6.6% to Rs 132, the company said. ARPU was Rs 141 in Q1 FY18.

However Idea was not the only operator that faced the impacts of growing competition in the sector but also Anil Ambani led Reliance Communications whose consolidated loss stood at Rs 2,709 crore in Q2 FY18.

In Q2 FY17, RCom registered a profit of Rs62 crore just after the launch of Mukesh Ambani led Reliance Jio.

This has also been RCom’s fourth straight loss making quarter. Total income of the firm declined 48% to Rs 2,667 crore in Q2. In Q4FY17, the company reported an ARPU of Rs 141 which was lower than its Q3 revenue per user reported. The loss making telecom operator will reportedly shut its 2G business from December 1.

Shares of the company fell 12.46% to Rs 12.30 a piece at 1100 hours on BSE Sensex.

India’s telecom major, Bharti Airtel, also saw its profit fall 63% on a fourth quarterly decline to Rs 586.1 crore on a consolidated basis. Revenues from its Indian operations dropped 13% to Rs 16,728 crore on an year-on-year basis in Q2 FY18.

"Lower EBITDA along with rising spectrum costs and continued investments in India have resulted in deterioration of Return on Capital Employed (ROCE) to 5.1% from 7.4% in the corresponding quarter last year," Airtel said.

While ARPU of the company stood at Rs 145 in Q2 which was Rs 188 in Q2 FY17.

Reliance Jio on the other hand had reported ARPU of Rs 156.40 per month in Q2 FY18. Jio also said its EBITDA stood at Rs 1,442 crore, or Ebitda margin of 23.5% in Q2.

Last week the company announced its Triple Cashback scheme wherein Prime subscribers would receive money back on recharging their phones with e-wallets. Subscribers would also have to recharge with Rs 399 or higher to receive a 100% cashback.

The Cellular Operators Association of India (COAI) has asked telecom regulator TRAI to look into this new offering to probe if it is another method of discounting tariff plans. 

TRAI had introduced IUC cut to six paise per minute from October 1. The operators have now started wooing customers with higher data benefits and free outgoing calls on roaming in the country.

Woes of the telecom sector do not seem to be coming to an end as TRAI has made its decision clear to move ahead with another spectrum auction in 2018. The elevated debt levels of the sector was estimated to reach a staggering Rs 4.8 lakh crore at the end of FY18 by ICRA.

Also Read: 

• TRAI dangles 5G spectrum auction bait but Indian telcos far from ready
• Vodafone announces free voice calling, data rollover for postpaid subscribers
• Airtel, Idea, Vodafone, Jio revise tariff plans; which one should you recharge with?