Telcos bleed: Vodafone Idea losses widen to Rs 5,005 crore in Q3
Incumbents continue to be affected due to below-cost tariffs
Vodafone Idea on Wednesday posted a massive consolidated net loss of Rs 5,005 crore during the October-December quarter, a tad lower than expected by analysts but still signifying the financial stress telecom operators are undergoing due to below-cost tariffs unleashed by Reliance Jio, which is leading to customers migrating to lower average realization per user (ARPU) offerings. The company’s net loss during the quarter widened from
Rs 4,974 crore reported in the preceding quarter.
This is the second quarterly loss the merged entity has posted since their merger was completed on August 31, 2018.
Last week, Bharti Airtel also reported its October-December earnings, where it posted a consolidated net profit of Rs 86 crore, down 27.73% compared with the preceding quarter. This was on the back of Rs 1,017 crore exceptional gain largely on account of the deconsolidation of Airtel Payments Bank. Before this exceptional gain, the company posted a net loss of Rs 1,041 crore, wider than Rs 965 crore (before exceptional gain) in the preceding quarter. This was the eleventh consecutive quarter during which Bharti posted a declining profit as it battles the tariff war with Jio.
On Tuesday, international rating agency Moody’s Investors Service, in fact, cut Bharti’s credit rating to a junk Ba1 from Baa3, the lowest investment-grade. This is for the first time that Bharti’s credit rating has been downgraded to below investment grade by an international agency.
Vodafone Idea’s revenue during the quarter at Rs 11,765 crore was down 2.2% sequentially, while Ebitda at Rs 1,137 crore was up 16.3%. Higher Ebitda despite declining revenue was because of lower operating expenses during the quarter due to a realization of merger synergies. The margin at 9.7% was higher than 8.1% in the preceding quarter.
The company said headline tariffs remained stable during the quarter with customers moving to lower bundled offers and ARPU increased by 1.5% to Rs 89 compared to Rs 88 in the preceding quarter. This is because, like Bharti, Vodafone Idea also removed the low-paying, mostly incoming users, some 35 million who recharged for less than Rs 35 a month. This reduced Vodafone Idea’s total subscriber base to 387.2 million versus 422.3 million in the previous quarter.
A similar move by Bharti saw its customer base reduce by a higher number of 48 million users during the quarter, bringing its total subscriber base down to 284 million from 332 million earlier. On the ARPU front, Vodafone Idea remains below Bharti and Jio who reported ARPU of Rs 104 and Rs 130 respectively during the October-December quarter.
On key operating metrics, the data volumes for Vodafone Idea increased by a good 11.5% q-o-q to 27,05,157 million megabytes, though remained much below Bharti Airtel’s 32,16,897 million MB and almost a third of Reliance Jio.
On the voice traffic front, Vodafone Idea led the pack, with total volume of 7,12,283 million minutes higher than both Bharti and Jio. This is because the merged entity has a higher subscriber base than the other two operators. On the real indicator on the voice front, which is used per subscriber, Vodafone Idea lagged peers at `580 minutes, with Jio in the lead at 794 minutes followed by Bharti at 726 minutes.
Commenting on the performance, Balesh Sharma, CEO Vodafone Idea, said, “The initiatives taken during the quarter started showing encouraging trends by the end of the quarter. We are moving faster than expected on integration, specifically on the network front, and we are well on track to deliver our synergy targets. We remain focused on fortifying our position in key districts by expanding the coverage and capacity of our 4G network, and target a higher share of new 4G customers while offering an enhanced network experience to our customers. The proceeds from the announced capital raise will put us in a strong position to achieve our strategic goals”.
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