It’s been almost a year since Reliance Jio made its entry into the Indian telecom market, but incumbents continue to bleed.

Latest results posted by Idea Cellular and Vodafone India, which are in the process of merger, have again posted steep decline in their profits, writes Priyadarshi Siddhanta

NEW DELHI, NOVEMBER 15, 2017: Idea Cellular has reported a two-fold increase in its loss in the second quarter of current fiscal to Rs.1,176 crore from Rs.617 crore loss in the April-June quarter. Similarly, Vodafone India also announced a steep 39% drop in its operating profit from Rs.4,075 crore for the April-September period this fiscal. 

“The operating environment for Indian mobile operators remained challenging with unrelenting pressure on pricing, introduction of GST at 18% (compared to service tax at 15%) and need for large investments to support the exploding data demand,” Idea Cellular said in a statement.

Idea’s higher share of rural subscribers, coupled with continued pricing pressure and higher GST slab, had a more pronounced impact on the company’s subscribers and revenue loss, it said. Consequently, the revenue declined 8.6% sequentially to Rs.7,465 crore. The company’s net debt as on September 30, 2017 stands at Rs 54,100 crore, including a large component of debt from DoT under ‘Deferred Payment Obligation’ for spectrum acquired.

The company said with the introduction of unlimited voice and bundled data price plans, the consumption habits of Indian mobility users is undergoing a sea change. “As Indian customers graduate to higher ticket unlimited/bundled plans, the mobile service consumption trends are shifting from ‘snacking’ to ‘buffet’ with marked higher per subscriber usage,” the Idea statement added. 

On the other hand, India’s second largest telecom operator, Vodafone India said: “Losses continued in India as service revenue declined 15.8% (Q1: 13.9% and Q2: 17.8%) as a result of intense price competition from the new entrant and aggressive competitor responses.”

Vodafone Group CEO Vittorio Colao in an analyst call said going ahead there will be pressure from the lower mobile termination charge (MTR) and to deal with it the company is focusing on acquiring more high value customers as well as retaining the existing ones and increasing focus on high revenue circles.

Vodafone India Managing Director and CEO Sunil Sood said, “Amidst continuing intense competition, we recorded a gain of 0.6 ppt in RMS in Q1 FY18 (Y-o-Y) and delivered a stable performance overall”. He, however. said the company is seeing signs of positive developments with consolidation of smaller operators in the market. 

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