There was no respite from financial stress for the incumbents during the quarter ended December 2017. Reve­­nues from mobile operations continued to decline under the unrelenting ­pricing pressures. Even the exponential surge in data consumption did not help alleviate their situation as ARPUs continued to head south. Lower tariffs lowered operator profitability. Operator revenues also received a major blow from the Telecom Regulatory Authority of India’s (TRAI) move to slash interconnection usage charges (IUC) by as much as 57 per cent. Meanwhile, Reliance Jio Infocomm Limited (RJIL) reported its first-ever profit since the commercial launch of ­services in September 2016.

tele.net takes a look at the financial results of key telecom operators during the quarter ended December 2017…

Bharti Airtel

Bharti Airtel registered a 39 per cent decline in its net income (net profit) from Rs 5.04 billion in the quarter ended December 2016 to Rs 3.06 billion in the corresponding quarter in 2017. The ­overall consolidated revenue declined by about 13 per cent from Rs 233.36 billion to Rs 203.19 billion during the same ­pe­riod. The overall earnings before ­inte­­rest, taxes, depreciation and amortisation (EBITDA) declined by 11.5 per cent from Rs 85.7 billion to Rs 75.87 billion during the period under review. The lower ­EBITDA along with rising spectrum costs and continued investments in India led to a decline in re­­turn on capital employed, from 7.1 per cent in the quarter ended December 2016 to 4.9 per cent in the ­corresponding ­quarter in 2017.

Region-wise, revenues from the ­company’s India operations registered a decline of 15 per cent from Rs 180.12 billion in the quarter ended December 2016 to Rs 152.94 billion in the corresponding qua­rter in 2017. In addition, the ­com­pany’s EBITDA declined by 20 per cent from Rs 72.51 billion to Rs 57.66 ­billion during the same period. The year-on-year decline in growth was primarily on the back of a 22 per cent fall in revenues from mobile services. Revenues from its mobile business declined from Rs 138.13 billion to Rs 107.51 billion during the period under consideration. In contrast, revenues from other businesses, including Digital TV and Airtel Business, recorded a year-on-year growth of about 10 per cent and 7 per cent respectively.

On the operations side, the blended average revenue per user (ARPU) declined by 28.6 per cent from Rs 172 in the ­quarter ended December 2016 to Rs 123 during the corresponding quarter in 2017. This comes even as its mobile data traffic recorded a staggering 543.6 per cent growth, from 172 billion MB to 1,106 billion MB during the same period. Mobile broadband customers grew by 64.9 per cent from 37.7 million to 62.1 million.

In a significant development, Airtel further consolidated its position in the telecom market by agreeing to acquire Tata Tele­services Limited’s consumer mobile business. The deal has been granted approval by the Competition Commission of India (CCI) and is now awaiting approval from other regulatory authorities.

Vodafone India

Vodafone India reported a 26.6 per cent decline in revenue from Euro 1,452 million during the quarter ended December 2016 to Euro 1,066 million during the quarter ended December 2017. Its service revenue declined by 23.1 per cent during the same period. According to Vodafone, the fall in revenues can be attributed to the intense competition in the sector and a 29.2 per cent decline in interconnection revenues owing to the IUC cut in October 2017.

On the operations’ side, the total data traffic reported on Vodafone’s network increased 4.38 times to 567,405 TB in the quarter ended December 2017 as against 105,457 TB in the preceding year. How­ever, the operator’s total ARPU declined by 27.8 per cent from Rs 158 ­during the quarter ended December 2016 to Rs 114 during the corresponding ­quarter in December 2017. This was owing to the increased adoption of ­unlimited packages by customers, longer validity periods and regulatory pressure.

Meanwhile, the merger between Idea Cellular and Vodafone India is in the final leg of regulatory approvals and is ­expected to be completed in the first half of 2018. The two companies plan to inject a combined equity of up to Euro 1.8 billion. Further, the joint venture will receive Euro 1 billion of the expected proceeds from the sale of Vodafone and Idea’s stand-alone towers to the American Tower Corporation.

Idea Cellular

Idea Cellular posted a net loss (consolidated loss after tax) of Rs 12.84 billion during the quarter ended December 2017. This was significantly higher than the Rs 3.83 billion loss reported during the corresponding quarter in 2016. Revenues declined by nearly 25 per cent from Rs 86.62 billion during the quarter ended December 2016 to Rs 65.09 billion during the corresponding quarter in 2017. The operator attributes this to the IUC reduction and the migration of high-ARPU ­customers to unlimited voice bundled data plans. Meanwhile, the operator’s EBITDA declined by 44.2 per cent from Rs 21.91 billion to Rs 12.23 billion during the ­period under consideration. Further, the EBITDA margin for the operator declined from 25.3 per cent to 18.8 per cent on a like for like basis. Idea Cellular’s net debt during the quarter stood at Rs 557.81 billion. A large part of this debt comprises outstanding spectrum payments to the Department of Telecommunications under the “deferred payment obligation” option.

On the operations side, the blended ARPU declined by 27.4 per cent from Rs 157 in the quarter ended December 2016 to Rs 114 during the corresponding quarter in 2017. On the data front, the monthly data usage per subscriber increased more than six times from 703 MBs during the quarter ended December 2016 to 4,742 MBs during the corresponding quarter in 2017.

RJIL

RJIL posted its first quarterly profit during the quarter ended December 2017. On a stand-alone basis, the company posted a net profit of Rs 5.04 billion as compared to a loss of Rs 2.71 billion in the quarter ended September 2017. The stand-alone revenue from operations grew by 11.9 per cent from Rs 61.47 billion to Rs 68.79 billion on a quarter-on-quarter basis. Meanwhile, the stand-alone EBITDA stood at Rs 26.28 ­billion, a growth of 82.1 per cent as compared to Rs 14.43 billion during the quarter ended September 2017. The EBITDA margin stood at 38.2 per cent, as against 23.5 per cent in the previous quarter. Meanwhile, the operator’s consolidated earnings before interest and taxes increased by 453.1 per cent from Rs 2.6 billion in the quarter ended September 2017 to Rs 14.36 billion in December 2017.

RJIL’s monthly ARPU declined only slightly, from Rs 156 to Rs 154 on a quarter-on-quarter basis. However, it was still much higher than that of other players in the industry. The company recorded a total wireless data traffic of 4.31 billion GB and a total voice traffic of 311.13 billion ­minutes during the quarter under review. Video consumption crossed 2 billion hours per month on the operator’s network.

RCOM

The quarter under consideration was a very significant one for Reliance Com­muni­­cations (RCOM) as it marked the end of the company’s long and interesting journey in the wireless consumer business segment. The operator made a full exit from its consumer business comprising the wireless, direct-to-home and public call office businesses. With this development, RCOM reported a 75 per cent decline in its consolidated net loss (attributable to the equity holders of the company) from Rs 5.31 billion during the quarter ended December 2016 to Rs 1.3 billion during the corresponding quarter in 2017. Meanwhile, its consolidated revenues (unaudited) declined by 30 per cent from Rs 16.98 billion during the quarter ended December 2016 to Rs 11.76 billion during the same period.

RCOM’s leaner business portfolio now comprises business-to-business (B2B) segments such as global and Indian enterprise, internet data centres, global submarine cable network and international long distance voice. Further, the ­operator has stated that its strategic ­transformation is under way. During the quarter, it announced its decision to exit from the Reserve Bank of India’s strategic debt restructuring framework and ­subs­equently signed definitive binding ­agreements with RJIL for the sale of its wireless, spectrum (excluding 4G ­spectrum under sharing), tower, fibre and media convergence node assets. Further, it stated that its asset monetisation is on track and will close by March 2018, ­subject to lenders’ consent and other ­regulatory approvals.

Outlook

The IUC cut, along with pricing ­pressures, continued to impact the in­cum­bent operators’ top line and ­bottom line during the quarter ended December 2017. Given that RJIL still commands sign­ificant pricing power, the tariff war in the industry is not expected to settle any time soon. This will only worsen ­operators’ balance sheets in the coming ­quarters, even as TRAI’s recent move to reduce international ­terminal charges will stymie any hope of an early financial recovery.

In the medium to long term however, as industry consolidation nears completion, three to four players will likely ­command the desired pricing power, leading to a rationalisation in tariffs and profits for operators. This will be largely helped by the reduced capex of merging entities, a growing subscriber base, ­normalcy in data tariffs and increased mobile penetration across the country.