A man speaks on his mobile phone as he sits in front of a shop displaying the Idea Cellular Ltd's logo on its shutter in Mumbai. | Reuters
NEW DELHI: The financial woes of older telecom companies continue to worsen, with financial results for the March quarter showing no turnaround in their loss-making spree.
While Bharti Airtel reported a 78 per cent fall in net profit for the quarter, Idea Cellular on Saturday announced that it has seen a nearly three-fold jump in comprehensive loss at Rs 930.6 crore.
The rise in losses during the final quarter of 2017-18 has also inflated the company’s total loss during the entire financial year. According to Idea’s results, loss for the full fiscal has swollen to Rs 4,139.9 crore from Rs 404 crore in 2016-17.
The company’s losses are a result of the current phase of hyper competitiveness the telecom sector is going through. With the entry of Reliance Jio seeing rates plummet, older telecom firms like Bharti Airtel and Idea Cellular have seen erosion in both margins and revenues.
“During the year, the dual negative factors of (a) steep reduction in domestic and international MTC settlement rate and (b) unrelenting rate pressure on voice and mobile data services as high ARPU consumers migrate to lower priced ‘unlimited voice bundled data plans’ resulted in 20.5% decline in Idea’s gross revenue in FY18,” the firm stated.
Its operating revenue for the quarter dropped 24.47 per cent to Rs 6,137.3 crore, while revenue from operations for the whole year fell to Rs 28,278.9 crore in FY18 from Rs 36,676.8 crore in FY17.
Apart from the current hyper competitiveness and high debt, Idea also blamed high regulatory headwinds for aggravating the industry’s financial stress. “The TRAI-led regulation changes including reduction of domestic Mobile Termination Charge from 14 paisa to 6 paisa per minute and ‘International mobile termination’ settlement charges from 53 paisa to 30 paisa per minute further aggravated the financial stress for the existing industry operators,” the company said.
The company is also going ahead with large scale investments, especially in building up its broadband infrastructure. “The overall capex spend for the year was Rs 70 billion (Rs 7,000 crore), majority of which was utilised for 4G expansion. The company’s Gross Investment in Fixed Assets has risen to nearly Rs 1,255 billion (Rs 1.255 lakh crore). The monetisation of this front loaded large investment in spectrum and equipment is inevitable as Digital India mission gathers momentum and mobile internet penetration improves,” Idea said.
Merger in final stages
Giving an update on its merger with Vodafone, Idea Cellular said the process is in the final stages and is expected to be completed by June 2018. “Both the companies now, under ‘Active infrastructure sharing’ programme and ‘2G & 4G ICR arrangements’ across various service areas, share around 49,000 sites. Planned Fibre and PoP sharing programme is also underway in Top 220 cities across the 22 telecom service areas,” it said.
