Idea Cellular woes deepen ahead of merger - Mobile World Live

Idea Cellular woes deepen ahead of merger

24 JAN 2018

Idea Cellular’s struggles ahead of a planned mega merger with Vodafone India continued as the company posted its largest ever quarterly loss, mainly due to declines in interconnection revenue.

Indeed, the company will hope the merger can curb a recent decline in earnings, which was fuelled by both regulatory headwinds and increased competition in India as a result of Reliance Jio’s entrance into the market in September 2016.

Idea said it expects the deal to complete in the first half of this year and it is now into the final leg of regulatory approvals. The deal will create the country’s largest operator by connections.

Regulatory changes take toll 
In the three months ending 31 December (the operator’s fiscal Q3 2018) Idea posted a loss of INR12.85 billion ($201.7 million), almost three times higher than it recorded in fiscal Q3 2017 and its fifth consecutive quarterly loss. Total revenue in the recent quarter of INR65 billion was down 24.9 per cent year-on-year.

The company said its performance in the recent period was impacted by regulator Telecoms Regulatory Authority of India’s (TRAI) decision to more than halve the interconnection fees operators can receive from rivals from 1 October 2017. Idea said the move cut its total revenue by approximately INR8.2 billion.

Rival Bharti Airtel also reported a sharp decline in revenue and net profit for the final calendar quarter of 2017, which it partly blamed on the termination rate reduction.

Idea said a TRAI plan to also cut international rates in February “remains a body blow to all operators and reduces investible funds for the critical Digital India programme”.

“The international usage charge rate drop only benefits the foreign operators, with no commensurate benefit to Indian consumers, but with significant foreign exchange and revenue loss to the Indian exchequer,” it added.

While both Airtel and Idea experienced declines during the quarter, Jio reported its first profit since making its explosive entry into the market.

In a bright spot, Idea said it crossed the 200 million subscriber milestone for the first time during the period, ending the quarter with 203 million.

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Kavit Majithia

Kavit joined Mobile World Live in May 2015 as Content Editor. He started his journalism career at the Press Association before joining Euromoney’s graduate scheme in April 2010. Read More >>

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