The quarter ended June 2020 brought in little respite for India’s private telcos, especially Vodafone Idea and Airtel. Barring Reliance Jio, which reported a steady increase in profits during the quarter, both Vodafone Idea and Airtel witnessed a sharp increase in their losses over the previous quarter. The onset of the Covid-19 crisis took a toll on Vodafone Idea and Airtel’s finances due to the loss of subscribers.
The only silver lining during the quarter was the massive uptake of both voice and data-based services due to the adoption of the work from home model. The Covid-19 outbreak forced people to work from home using their mobile data networks/home broadband for accessing the internet. In fact, all operators witnessed a phenomenal surge in mobile data usage on account of increased video and related content viewing as well as increased time on social media, etc.
Subscribers upgraded their subscriptions to include more voice and data to their mobile plans, and increased the speeds and data limits of their fixed broadband plans, resulting in ARPU uptrading for two operators. Bharti Airtel reported the highest ARPU during the quarter at Rs 157, up from Rs 154 during the previous quarter. Further, Reliance Jio’s ARPU grew from Rs 130.60 to Rs 140.30 on a quarter-on-quarter basis. However, Vodafone Idea witnessed a steep fall in ARPU from Rs 121 to Rs 114 contrary to the trend in the previous quarter, wherein it reported an increase in ARPU from Rs 109 to Rs 121 on a quarter-on-quarter basis.
Meanwhile, the Supreme Court’s judgement on adjusted gross revenue (AGR) continued to hurt the finances of both Airtel and Vodafone Idea. Taking a strong stance, the apex court has asked telcos to treat the calculation given by the Department of Telecommunications (DoT) as final, with no scope of reassessment. While Vodafone Idea continues to be the worst hit by the apex court’s order, Bharti Airtel too has been burdened with the pending dues. Since the Supreme Court has reserved its order regarding the staggered payment of pending dues and terms thereof, it remains to be seen whether telcos receive some respite on this front.
A look at the operational and financial results of telecom operators during the quarter ended June 2020…
Reliance Jio continued to report a robust financial performance during the quarter ended June 2020 with a net profit of Rs 25.2 billion, up from Rs 23.31 billion during the quarter ended March 2020. The operator’s stand-alone revenue from operations, including access revenues, grew from Rs 148.35 billion to Rs 165.57 billion during the same period. Meanwhile, the stand-alone earnings before interest, taxes, depreciation and amortisation (EBITDA) increased from Rs 62.01 billion to Rs 72.81 billion and the EBITDA margin grew from 41.8 per cent to 44 per cent.
On the operational front, customer engagement increased during the quarter with the national lockdown driving average wireless data consumption per user per month to 12.1 GB and average voice consumption to 756 minutes per user per month. The operator also witnessed gross customer additions of 15.1 million during the quarter despite Covid-related restrictions across the country. As a result, the operator’s subscriber base stood at 398.3 million, the highest among all operators.
Further, the monthly churn rate for wireless subscribers during the quarter was the lowest for Jio at only 0.46 per cent. Moreover, its ARPU stood at Rs 140.3 per subscriber per month, up from Rs 130.60 per subscriber per month in the previous quarter. According to Jio, the strong ARPU growth along with the lowest industry churn has strengthened its positioning. The total wireless data traffic during the quarter ended June 2020 stood at 14.2 billion GB while the total voice traffic stood at 889.4 billion minutes. Jio’s fibre-to-the-home services also witnessed increased demand due to the lockdown.
The quarter also remained quite eventful as Jio Platforms Limited raised Rs 1,520.56 billion from 13 investors including Facebook, Google, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG, L Catterton, Public Investment Fund of Saudi Arabia, Intel Capital and Qualcomm Ventures despite gloomy market sentiment amid the Covid-19 crisis. In addition, Jio’s parent company Reliance Industries successfully completed India’s largest ever rights issue worth Rs 531.24 billion.
These funds will help bolster Reliance Jio’s initiatives towards delivering breakthrough technologies and building a digital service platform. Another major development in the digital space during the quarter was the launch of India’s first and only cloud-based video-conferencing app, JioMeet. According to the company, JioMeet has been downloaded by more than five million users within a few days of its launch.
Bharti Airtel’s consolidated net loss widened to Rs 159.33 billion during the quarter ended June 2020 from Rs 52.37 billion in the quarter ended March 2020. This marks Airtel’s fifth consecutive quarterly loss, mainly attributed to one-time expenses related to AGR dues. The operator’s consolidated EBITDA increased from Rs 103.26 billion to Rs 106.39 billion while the EBITDA margin grew marginally from 43.5 per cent to 44.4 per cent on a quarter-on-quarter basis.
However, the operator’s consolidated revenue grew from Rs 237.23 billion to Rs 239.39 billion during the period. This can be attributed to the growth in revenue from the Indian market, which increased from Rs 174.38 billion during the quarter ended March 2020 to Rs 175.89 billion during the quarter ended June 2020.
On the operational front, Airtel witnessed an increase in ARPU in the India market for the fifth consecutive quarter. The operator’s ARPU increased from Rs 154 to Rs 157 driven by tariff hikes in the previous quarter along with the operator’s continuing focus on quality customers.
In terms of subscriber base, Airtel witnessed a quarter-on-quarter decline of 1.3 per cent, from 309.75 million to 305.69 million, owing to the customer’s inability to get physical recharges due to the Covid-induced lockdown. However, the increased data usage during this period led to an increase in the operator’s 4G subscriber base from 136.3 million to 138.3 million.
On the other hand, the Africa market witnessed a fall in revenue from $899 million to $851 million quarter on quarter. Further, Airtel Africa’s net profit declined from $65 million to $57 million, making it the third consecutive quarter of declining bottom line. This fall in net profits can be attributed to the business disruption caused by the Covid-19 pandemic.
In terms of the Supreme Court judgement on AGR dues, Airtel had made a provision of Rs 368.32 billion for the period up to March 2020. Since the Supreme Court recently observed that AGR dues calculated by DoT are to be treated as final without any scope for reassessment, Airtel made an incremental provision of Rs 107.44 million, including net interest, during the quarter ended June 2020, towards its balance AGR dues.
Vodafone Idea Limited
Vodafone Idea’s consolidated net loss widened from Rs 116.43 billion during the quarter ended March 2020 to Rs 254.6 billion during the quarter ended June 2020. Further, its revenue declined by 9.3 per cent from Rs 117.54 billion to Rs 106.59 billion during the same period. The operator attributes the decline to the nation-wide lockdown and the disruption of economic activities to the Covid-19 crisis.
The EBITDA witnessed a quarter-on-quarter decline of 6.4 per cent from Rs 43.8 billion to Rs 40.98 billion while the EBITDA margin stood at 14.4 per cent in the quarter ended June 2020 vis-a-vis 14.6 per cent in the previous quarter. The operator’s gross debt (excluding lease liabilities) stood at Rs 1,189.4 billion during the quarter. This included deferred spectrum payment obligations worth Rs 922.7 billion due to the government. Further, the net debt stood at Rs 1,155 billion as against Rs 1,125.2 billion during the quarter ended March 2020.
The capex spent during the quarter ended June 2020 stood at Rs 6 billion, much lower than the Rs 18.2 billion during the previous quarter, owing to disruptions in equipment supply and logistics following the nationwide lockdown.
On the operational front, gross additions were severely impacted due to the closure of retail stores during the nationwide lockdown, resulting in a sharp decline in the subscriber base from 291 million to 279.8 million. The subscriber churn reduced to an all-time low of 2 per cent during the June quarter as opposed to 3.3 per cent in the March quarter, on account of lower net disconnections. The ARPU also witnessed a steep decline from Rs 121 during the quarter ended March 2020 to Rs 114 during the quarter ended June 2020.
However, the operator witnessed a strong growth of 10.6 per cent in data volume to 4,523 billion MB, the highest in the past six quarters. Meanwhile, the data usage per broadband subscriber increased to 13 GB per month. At the end of the quarter, the 4G subscriber base was 104.6 million. While the operator continued to invest in the 4G network to increase coverage and capacity, hardware deployment during the quarter was impacted by the lockdown. Vodafone Idea added around 13,000 4G fixed division duplexing sites, primarily through refarming of 2G/3G spectrum to expand its 4G capacity.
Another major development was the near completion of network integration of Vodafone India and Idea Cellular, with Vodafone Idea realising its targeted annualised opex synergies of Rs 84 billion well ahead of the original timeline. Having successfully achieved these synergies, the operator rolled out a further cost optimisation plan during the quarter. Through this exercise, Vodafone Idea plans to achieve Rs 40 billion of annualised cost savings over the next 18 months.
On the AGR front, the operator recognised a charge of Rs 194.4 billion during quarter ended the June 2020 as an exceptional item towards the total estimated AGR liability, in addition to the estimated recognised liability of Rs 460 billion as of March 31, 2020.
By Kuhu Singh Abbhi