Idea Cellular announces unaudited Ind AS results for the first quarter (Q1) ended 30 June 2017
27 July, 2017
Share| Highlights – Q1 FY18 | |||
|---|---|---|---|
| Idea – Standalone1 | Revenue Rs. 81,665 mn | EBITDA Rs. 18,753mn | PAT Rs. -6,170mn |
| Particulars | Q1FY18 | Q4FY17 | Q1FY17 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Revenues - Established Services Areas3 | 75,784 | 75,260 | 88,051 | 0.7% | -13.9% |
| Revenues - New Services Areas4 | 5,881 | 6,002 | 6,815 | -2.0% | -13.7% |
| Total revenue | 81,665 | 81,261 | 94,866 | 0.5% | -13.9% |
| EBITDA - Established Services Areas3 | 20,169 | 22,445 | 32,024 | -10.1% | -37.0% |
| EBITDA - New Services Areas4 | -1,416 | -1,246 | -1,076 | -13.6% | -31.5% |
| Total EBITDA | 18,753 | 21,199 | 30,948 | -11.5% | -39.4% |
| EBITDA % - Established Service Areas3 | 26.6% | 29.8% | 36.4% | -3.2% | -9.8% |
| EBITDA% - New Service Areas4 | -24.1% | -20.8% | -15.8% | -3.3% | -8.3% |
| EBITDA% | 23.0% | 26.1% | 32.6% | -3.1% | -9.7% |
| Depreciation &; Amortisation | 20,679 | 19,885 | 19,192 | 4.0% | 7.8% |
| EBIT | -1,926 | 1,314 | 11,756 | -246.6% | -116.4% |
| Interest and Financing Cost (Net) | 11,538 | 9,366 | 9,429 | 23.2% | 22.4% |
| Dividend from Indus | 2,657 | - | 3,623 | - | -26.6% |
| PBT | -10,807 | -8,052 | 5,949 | -34.2% | -281.7% |
| PAT (Standalone1) | -6,170 | -4,300 | 4,971 | -43.5% | -224.1% |
| Cash Profit5 (Standalone) | 9,608 | 12,494 | 25,209 | -23.1% | -61.9% |
| Share of Profit from Indus &; ABIPBL | 818 | 983 | 1,035 | -16.7% | -21.0% |
| Deferred Tax on Undistributed earnings of Indus | 140 | -41 | 179 | -442.7% | -22.1% |
| Other Comprehensive Income (net of Tax) | -10 | 21 | -33 | -146.8% | 70.3% |
| Total Comprehensive Income (Consolidated2 ) | -8,159 | -3,256 | 2,171 | -150.6% | -475.9% |
Mobile services industry continues to witness disruption
The upheaval in the Indian wireless industry continued in Q1FY18, despite the new entrant slowly migrating from ‘Free Services’ to ‘Paid Services’ but with heavily discounted unlimited voice and data pricing plans. Amidst this market aggression, existing operators including Idea also introduced similar competitive unlimited price plans, which is likely to result in decline of industry revenues, although the impact of the same is expected to be more pronounced on non-4G operators. These aggressive tariff offerings by Idea, led by unlimited voice and data bundled plans, resulted in steep decline of voice and mobile data realisation rates. However, for the company, the fall in realisation rates was largely compensated by a substantial volume growth in both mobile voice and data segments. As a result, Idea standalone revenue of Rs.81,665 million in Q1FY18 registered a marginal growth of 0.5 per cent compared to Rs.81,261 million in Q4FY17.
During Q1FY18, the sequential quarterly voice minutes grew by a healthy 8.4 per cent to 250.7 billion minutes (vs. 231.4 billion minutes in Q4FY17), while the voice realisation rate fell by 5.7 per cent to 24.4 paisa/min (vs. 25.9 paisa in Q4FY17). Mobile data volume witnessed a meteoric growth of 99.1 per cent on sequential quarterly basis as Idea’s large Pan India network, primarily its Wireless Broadband Network, carried 252.8 billion Mega Bytes in Q1FY18, nearly double the traffic consumption in Q4FY17. However, the mobile data rate (ARMB) saw an unprecedented decline of 52.9 per cent, reaching to as low as 5.4 paisa/MB (vs. 11.5 paisa in Q4FY17).
In spite of the current challenging industry scenario, Idea has been successful in sustaining its market competitiveness and added 15.8 million VLR subscribers over last 12 months, taking the EoP subscriber base (VLR) to 199 million as of 30 June 2017. Idea maintained its ‘Subscriber Market Share’ (VLR) at 19.5 per cent (May’17) and ‘Revenue Market Share’ @ 18.9 per cent (FY17).
Investment in long-term value creators
During last two years (Q1FY16 to Q1FY18), Idea has aggressively expanded its wireless broadband infrastructure by 3.5 times adding 83,765 sites (3G+4G), expanding the network to 117,386 broadband sites (3G+4G). Idea’s wireless broadband network (3G+4G) now covers 524 million Indians across all 22 service areas in ~106,000 towns and villages. With the addition of 46,576 4G sites in the same period, the company rapidly expanded its 4G-LTE presence to ~47,000 towns and villages and now covers 30.2 per cent population (353 million Indians) in 20 service areas.
4G network is fast emerging as the preferred platform for mobile data consumption amongst Indian subscribers. While the total mobile data users on Idea network declined from 42.2 million (Q4FY17) to 38.1 million (Q1FY18), 4G subscribers more than doubled from 3.1 million (Q4FY17) to 6.5 million (Q1FY18). Further, the data usage on 4G platform exploded to 67.6 billion MB in Q1FY18 (from 18.7 billion MB in Q4FY17), sequential quarterly growth @ 262 per cent. Despite such accelerated growth in 4G data volume, Idea’s 4G network utilisation (excluding still to be deployed 2300 MHz and 2500 MHz capacity spectrum) remains below 30 per cent. The planned deployment of 2300 MHz or 2500 MHz spectrum band in five of its leadership markets during the current financial year will further boost Idea’s 4G capacity in these key markets. Additionally, the company also remains on course to introduce VoLTE – Voice services on 4G LTE network by early calendar year 2018.
In order to support the burgeoning demand of mobile broadband services, Idea also increased its fibre network by nearly 53,000 km (95,100 km in Q1FY16 to 148,100 km in Q1FY18). The company’s Gross Investment in Fixed Assets has now risen to over Rs.1,195 billion, a net addition of Rs.545 billion over the last 24 months. The capex spend for the quarter was Rs.11.7 billion, mainly funded from cash profit of Rs.9,608 million. The capex guidance for FY18 stands at Rs.60 billion.
Subdued Q1FY18 financial performance
In the environment of steep rate fall and capacity expansion, EBITDA for the company during the quarter declined by 11.5 per cent to Rs.18,753 million compared to Rs.21,199 million in Q4FY17, largely due to higher operating cost related to Roaming and Access (as outgoing minutes increased) and Network expenses. The EBITDA margin for the quarter declined from 26.1 per cent in Q4FY17 to 23 per cent in Q1FY18.
Additionally, the full quarter impact of Spectrum acquired by Idea in Oct’16 resulted in ‘Depreciation &; Amortisation’ charge increasing to Rs.20,679 million and ‘Interest &; Financing Cost (Net)’ rising to Rs.11,538 million. During Q1FY18, the company received from Indus dividend of Rs.2,657 million. Idea is reporting a PAT loss, after accounting for the dividend from Indus, of Rs.6,170 million (v/s PAT loss of Rs.4,300 million in Q4FY17) on standalone basis.
The financial stress in the Mobile sector remains at its peak, post the introduction of aggressive unlimited bundled plans by new entrant forcing other operators to follow. Resultantly, all ‘Telecom Service Providers’ are reporting steep decline in revenues, profitability and cash flows and all but one Indian Wireless Operator quarterly results are likely to show significant financial losses.
The Net Debt as on 30 June 2017 stands at Rs.539.2 billion, including a large component of debt from DoT under ‘Deferred Payment Obligation’ for Spectrum acquired in Auctions. The consolidated Total Comprehensive Income (including share from Indus and ABIPBL) stands at a loss of Rs.8,159 million in Q1FY18 (v/s Rs.3,256 million in Q4FY17).
Merger u;pdate
On 20 March 2017 Vodafone Group Plc and Idea Cellular announced an agreement to combine their operations in India (excluding Vodafone’s 42 per cent stake in Indus Towers) to c;reate India’s largest telecom operator. The merger transaction is subject to approval from the relevant regulatory authorities and Idea’s shareholders. The company has recently received approval for the proposed combination from the ‘Competition Commission of India’, one out of the four main approvals required for combination of Vodafone India (mobile business) and Idea Cellular Ltd. The Scheme of Arrangement has already been filed with SEBI and Stock Exchanges and is waiting for their approvals.
In the meantime, Idea remains nimble, agile, adaptive, and focused on its execution capabilities. The company continues to strive for improving its capacity utilisation, optimising costs and delivering sustainable benefits to the consumers. Idea remains hopeful that post the current round of short term challenges; it will be able to capitalise on the emerging opportunities in mobile voice, wireless data business, digital content and mobile banking as telecom market invariably moves towards consolidation with likely five major providers.
Notes:
- Idea Standalone represents Idea, and its 100 per cent subsidiaries. Effectively, this encompasses all operations, excluding Indus and Payments Bank (ABIPBL).
- Idea Consolidated represents Idea Standalone and proportionate consolidation of Indus and Payments Bank at PAT level.
- Established Service Areas represent 15 service areas namely Maharashtra &; Goa, Gujarat, Andhra Pradesh, Madhya Pradesh &; Chhattisgarh, Delhi, Kerala, Haryana, Uttar Pradesh West &; Uttaranchal, Uttar Pradesh East, Rajasthan, Himachal Pradesh, Punjab, Karnataka, Mumbai and Bihar service areas.
- New Service Areas represent seven service areas of Orissa, Tamil Nadu, J&;K, Kolkata, West Bengal, Assam and North East.
- Cash Profit is calculated as summation of PAT, Depreciation &; Amortisation, charge on account of ESOPs and Deferred tax (excluding MAT), for relevant period.
- Figures for past periods have been regrouped, wherever necessary.
About Idea Cellular Limited
Idea Cellular is the third largest wireless operator in India with a Revenue Market Share of 18.8 per cent (Q4FY17). Idea is listed on the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE) in India. Idea is part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla Group is a conglomerate with operations in more than 35 countries. The Aditya Birla group has a history of over 50 years and has businesses in, among others, mobile telecommunications, metals and mining, cement, carbon black, textiles, garments, chemicals, fertilisers, life insurance and financial services industries.
