Reliance Jio effect: Vodafone India reports 10.2% fall in operating profit

After Mukesh Ambani-led Reliance Jio's free offers took a toll on the earnings of Bharti Airtel and Idea Cellular in the last quarter, it was the turn of country's second-largest telco Vodafone India to take a hit on its numbers.

On Tuesday, Vodafone India reported a 10.2 per cent fall in its FY17 operating profit at Rs 11,784 crore, hurt by aggressive competition.

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The company, which is set to be merged with Idea Cellular to create the country's largest telecom player, had reported an earnings before interest, tax depreciation and amortisation (EBITDA) profit of Rs 13,115 crore on a standalone basis in the year-ago period.

The British telecom major's overall revenue on a standalone basis slipped 0.6 per cent to Rs 43,095 crore, while the margin contracted by nearly three percentage points to 27.2 per cent.

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Vodafone's Managing Director and Chief Executive Officer Sunil Sood said, "Amid an unprecedented and intensely competitive environment, we delivered a stable performance."

He said the company, whose subscriber base grew to 209 million, recorded a 0.7 per cent gain in its revenue market share to 22.7 per cent as of December 2016 quarter.

It reported an average revenue per user of Rs 158.

The company invested Rs 8,311 crore during the fiscal and its net debt was Rs 60,200 crore as of March 31.

The entry of Reliance Jio has intensified the competition and hurt the financials of all the incumbents as they seek to protect their customers from moving out.

The free offerings of Reliance Industries'telecoms venture Jio, which started operations late last year, sparked a fierce price war in the world's second-biggest mobile phone market, forcing rivals such as Idea to launch cheap service plans.

That has impacted revenues and profitability across the uber-competitive telecoms sector.

Country's largest telecom firm Bharti Airtel reported its lowest quarterly profit in four years as net earnings fell 72 per cent in January-March 2017, hit by "sustained predatory pricing" by rival Reliance Jio.

The net profit in the quarter ended March 2017 stood at Rs 373.4 crore (or Rs 0.93 a share), nearly a fourth of the Rs 1,319.2 crore (or Rs 3.30 a share) notched in the year-ago period.

Its smaller rival Idea Cellular posted its second straight quarterly loss after a rival carrier's free services hit sales and eroded margins.

Idea, part of the Aditya Birla conglomerate, made a consolidated net loss of about Rs 327.9 crore ($51.06 million) in the three months to March 31, compared with a net profit of about Rs 451.9 crore a year ago.

(With PTI inputs)