Idea Cellular Q2 Profit Slumps Amid Fierce Competition

Idea Cellular Q2 Profit Slumps Amid Fierce Competition
Highlights
  • Idea reported an 88 percent slump in Q2 profit
  • Idea reported a consolidated net profit of Rs. 91.46 crores in Q2
  • Average revenue per user for voice services fell 6.2 percent to Rs. 122

Idea Cellular, India's third-largest telecom operator by revenue, reported an 88 percent slump in second- quarter profit as competition from a new wireless carrier and higher costs weighed.

Jio, a venture backed by India's richest man Mukesh Ambani's Reliance Industries, has shaken up country's telecom sector with free voice and data plans until December 31, forcing carriers such as Idea to cut tariffs to retain clients.

(Also see: TRAI Recommends Rs. 3,050 Crores Fine on Airtel, Vodafone, Idea)

Idea's spend on expanding its network in India also contributed to the decline in profit.

Idea reported a consolidated net profit of Rs. 91.46 crores in the fiscal second quarter ended September 30, compared with Rs. 762 crores a year ago, the company said in a statement.

Analysts had, on average, expected a profit of Rs. 155 crores, according to Thomson Reuters data.

Idea "remains vulnerable to competition given (its) relatively smaller scale and high leverage," Citi said in a note after the results.

Revenue rose 7 percent to Rs. 9,300 crores from a year ago, but fell nearly 2 percent on a sequential basis, due to declines in voice minutes, and cheaper data and voice plans.

Average revenue per user for voice services fell 6.2 percent on a sequential basis to Rs. 122.

Expenditure increased 14.9 percent to Rs. 8,410 crores from a year earlier, and finance charges more than tripled to Rs. 1,004 crores.

Idea shares closed 4 percent lower ahead of results in a broader Mumbai market that eked out meagre gains.

© Thomson Reuters 2016

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Further reading: Idea, Idea Cellular Profits, Telecom, India
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