Idea Cellular, India’s third largest mobile operator, reported its first-ever quarterly net loss for its fiscal Q3, which it attributed to a price war kicked off by newcomer Reliance Jio’s extended free offers of voice and data.
Idea posted a net loss of INR4.79 billion ($71.3 million) for the quarter ending 31 December, on revenue of INR86.6 billion, which fell 3.8 per cent year-on-year and was down 6.9 per cent from the previous quarter.
The operator, with a 17 per cent market share, said in a statement: “The Indian mobile industry witnessed an unprecedented disruption in the quarter of October to December 2016, primarily due to free voice and mobile data promotions by the new entrant in the sector.”
It noted revenue KPIs and financial parameters for all mobile operators have sharply declined, and for the first time the country’s wireless sector is trending towards an annual revenue decline of 3 per cent to 5 per cent in FY2017: “The sector can expect to recover revenues only once the new operator starts charging for its pan India mobile services.”
To hold onto its existing mobile subscribers, Idea said it was forced to reduce voice rates during the quarter by 10.6 per cent and cut its mobile data rates by 15.2 per cent. Voice ARPU fell 9 per cent year-on-year to INR114, while blended ARPU dropped 11 per cent to INR157.
Despite the hightenend competition, the operator managed to add 6.7 million subsribers during the quarter to take its total subcriber base to 185.2 million, giving in a 17 per cent market share – just 2 percentage points behind rival Vodafone India. However, the free promotions had a strong impact on its mobile data business, with mobile data customers dropping 5.5 million sequentially to 48.6 million in fiscal Q3.
In the face of declining profitability after Jio’s entry, Idea and Vodafone India recently confirmed they are holding merger talks. A deal between the two could create a new market leader and fend off increased competition in the market.
In spite of short term challenges, Idea said it is committed to offering nationwide wireless broadband services (3G/4G) by April in all 22 service areas from the existing 17 service areas. Over the last two calendar years it expanded its infrastructure by 69 per cent, adding 95,302 mobile sites, including almost quadrupling its 3G/4G sites to more than 100,000 in fiscal Q3.
Its capex rose 5.8 per cent year on year to INR65 billion.