Idea net plunges 88% to a trickle on Reliance Jio, spectrum impacts
Investments in network expansion, coupled with competition putting a pressure on pricing led the third largest telco Idea Cellular to report a huge decline in the September quarter net profit at Rs 90 crore.
Mumbai: Investments in network expansion, coupled with competition putting a pressure on pricing led the third largest telco Idea Cellular to report a huge decline in the September quarter net profit at Rs 90 crore.
The Aditya Birla Group company had a consolidated net profit of Rs 757.8 crore in the year ago quarter. In the preceding June quarter, its post-tax profit was Rs 217.08 crore.
Managing Director Himanshu Kapania today said the numbers are not comparable with the year-ago figures because of huge investments in spectrum and network, which have led to lower utilisation.
In the last two years, the company has committed over Rs 40,000 crore for spectrum buys (and Rs 61,000 in the last five auctions), invested Rs 45,000 crore and also increased its towers to over 85,000 from the 25,000 in April, he said, adding these investments are proactive in nature.
Customer acquisition will be the focus for the company going ahead, he said, adding it is done with acquiring the spectrum with the recently-concluded auctions.
However, it is competitive pressures inflicted both by the entry of Reliance Jio (RJio) and the existing players which are one of the prime concerns for the company, which reported a decline in the average revenue per user (Arpu).
The Arpu declined to Rs 130 from Rs 144 in the year-ago period despite an increase in the usage and the revenue grew at the slowest pace in history at 7.2 percent to Rs 9,300 crore, Kapania said.
Kapania said the entry of RJio has resulted in a change in market dynamics where the Arpu, rather than the rates, will be the focus area from here on.
He explained that keeping the Arpu in mind, RJio has adopted a strategy of offering a blended services, including both voice and data, and indicated that Idea will also be keen to follow the same.
RJio launched its services last month, offering free voice and SMSes for lifetime and comparatively cheaper data. For incumbent players, the voice stream contributes a bulk of the revenue base at over 70 percent.
Idea's voice revenue declined by 5.3 percent in Q2 over the preceding quarter due to a 1.9 percent decline in minutes which was attributed to seasonal factors and a 3.4 percent dip in the realised rates, he said.
Having committed Rs 12,700 crore in the recent auctions, the company has raised its capex target for the fiscal by Rs 1,000 crore to between Rs 7,500 crore and Rs 8,000 crore, Chief Financial Officer Akshaya Moondra said.
Moondra said the company raised a loan of Rs 5,000 crore to adhere to the commitment of Rs 6,499 crore in upfront payment for the newly-acquired spectrum, taking its net debt to Rs 36,402 crore as of September.
The company is continuing with its plan of deleveraging by divesting up to 49 percent in its towers arm, he said, without giving a timeline on how it expects the process to move.
The telecom operator will be launching a games service for its wireless broadband users next quarter, which will be followed by offerings in music, movies, voice over Internet protocol and messaging, Kapania said.
On the payments bank front, Idea will be making the final application in the next two months and launching the bank inside the deadline of March 2017, he said, adding a Chief Executive is already in place.
Idea's network has the potential to serve over 460 million customers at present, and it is targeting to increase it to 1 billion by FY19, Kapania said, adding by the end of the current fiscal the company's services will be available in all the 26 telecom circles.
The company scrip plunged 3.75 percent to Rs 77 on the BSE, whose benchmark index Sensex rose 0.36 percent.