The Indian wireless industry witnessed an unprecedented disruption in the second half of financial year 2016-17 (FY17) on account of free voice and mobile data promotions by Reliance Jio. The October 2016 to April 2017 interval can be best described as the Period of Telecom Discontinuity, permanently changing mobility business parameters. Consequently, the revenue KPIs and financial parameters for all mobile operators have sharply declined in H2 FY17. For the first time in its history, the flourishing Indian mobility industry is trending toward an annual revenue decline of ~2 percent in FY17 (vs FY16). With the new entrant starting to charge for its services, albeit very slowly, the sector is expected to return to growth in the next financial year.

Bharti Airtel Limited

Q4 Performance. The consolidated revenues for Q4’17 at Rs.21,935 crore, Y-o-Y drop of 8.8 percent (reported drop of 12.1 percent) on an underlying basis (viz. adjusted for Africa/Bangladesh divested operating units and tower assets sale). Consolidated Y-o-Y revenue growth muted by 3.2 percent on account of Nigeria currency devaluation. Consolidated mobile data revenues for the quarter at Rs.3686 crore, Y-o-Y drop of 14.6 percent on an underlying basis.

India revenues for Q4’17 at Rs.17,036 crore drop by 7.1 percent Y-o-Y primarily led by mobile drop of 11.4 percent Y-o-Y. Mobile market remains turbulent in the current quarter as well due to free offering by the new operator. The company has added significant data capacities by rolling out +72K incremental mobile broadband base stations as compared to last year. Mobile broadband customers increased by 20.5 percent to 42.7 million from 35.5 million in the corresponding quarter last year. Mobile data revenues now contribute to 21.5 percent of mobile India revenues vis-à-vis 23.3 percent in the corresponding quarter last year.


Consolidated EBITDA at Rs.7993 crore de-grew 13.0 percent Y-o-Y with EBITDA margin dropping by 0.4 percent to 36.4 percent, led by India SA margin drop of 2.4 percent Y-o-Y on an underlying basis. The consolidated EBIT of Rs.2964 crore represents a Y-o-Y de-growth of 31.4 percent on account of higher spectrum amortization costs in India. Net interest costs of Rs.1908 crore have risen from Rs.1524 crore in the corresponding quarter last year – largely due to increased spectrum-related interest costs. Forex and derivative loss for the quarter came in at Rs.8 crore compared to loss of Rs.177 crore in the corresponding quarter last year. After accounting for exceptional items (net loss of Rs.73 crore), the consolidated net income for the quarter stands at Rs.373 crore (Q3’17: Rs.504 crore) compared to Rs.1319 crore in the corresponding quarter last year.

Full-Year Performance. Annual consolidated revenues at Rs.95,468 crore grew by 1.1 percent over the previous year (reported drop of 1.1 percent) on an underlying basis, led by growth of 3.6 percent in India. Africa top-line grew by 4.4 percent (constant currency) on an underlying basis. Consolidated revenue growth was impacted by 2.7 percent due to currency devaluation in Africa, primarily contributed by Nigerian Naira. Consolidated EBITDA at Rs.35,621 crore reflects an EBITDA margin of 37.3 percent, an improvement of 1.9 percent over the previous year. EBIT at Rs.15,677 crore de-grew by 5.7 percent, with margin dropping by 0.8 percent as compared to previous year. The company has generated a healthy OFCF of Rs.15,746 crore during the year, which grew by 16.0 percent versus previous year. Net Income for the year de-grew by 37.5 percent to
Rs.3799 crore (PY: Rs.6077 crore).

The company’s consolidated net debt has decreased to USD 14,094 million from USD 14,339 million in the previous quarter. Net debt excluding the deferred payment liabilities to the DOT and finance lease obligations has decreased to USD 7321 million from USD 7650 million in the previous quarter. Net debt to EBITDA ratio (LTM) for the quarter has moved to 2.73 times from 2.69 times in the previous quarter. High spectrum costs and consequent increase in associated amortization costs has resulted in deterioration of return on capital employed (ROCE) to 6.5 percent from 8.3 percent in the previous year.

Idea Cellular


Q4 Performance. The standalone Idea revenue dropped to an unforeseen level in Q4’17 at Rs.81,261 million, a sequential quarterly decline of 6.2 percent on the back of 6.9 percent decline in Q3’17 (vs Q2’17). However, due to focused cost optimization drive and forex gain during the quarter, the company was able to hold its EBITDA at Rs.21,965 million (Q-o-Q growth @ 1.4 percent), with EBITDA margin @ 27 percent in
Q4’17, in spite quarterly revenue decline of Rs.5366 million.

Full-Year Performance. On the financial year basis, Idea, for the first time since its IPO, is reporting a revenue decline @ 1 percent at Rs.355,757 million for FY17 (Rs.359,494 million in FY16). While the company remains optimistic on India growth story and continues to expand its scale of operations, this tumultuous phase subdued Idea’s EBITDA during the current financial year by 14.1 percent to Rs.102,763 million (vs Rs.119,675 million in FY16). Further, last two years of high investment in spectrum and equipment has increased the depreciation and amortization charge to Rs.78,272 million and interest and financing cost (net) to Rs.37,341 million, thereby Idea PAT is at a loss of Rs.4075 million in FY17 on standalone basis – first ever annual loss in last 11 years since its IPO during the year 2007.

The net debt as on March 31, 2017 stands at Rs.500.7 billion, including a large component of debt from DoT under deferred payment obligation for spectrum acquired in auctions. With adoption of Ind AS, the financials of Indus (joint venture) and ABIPBL (associate) are consolidated at PAT level only. Accordingly, the consolidated total comprehensive income (including share from Indus and ABIPBL) stands at a loss of Rs.4040 million in FY17 against surplus of Rs.27,142 million in FY16.

Vodafone India

Vodafone India reported its lowest ever revenue per user in the January to March quarter. Blended average revenue per user (ARPU) fell 10 percent from the previous three months to Rs.140 in the March quarter.


Vodafone India’s revenue for the last financial year fell 0.5 percent to Rs.42,956 crore. Earnings before interest, tax, depreciation and amortization (EBITDA) too fell 10.2 percent to Rs.11,784 crore in 2016-17, compared to the previous year. This brings the company’s debt to EBITDA ratio to 5.1 – the highest among the top three telecom players.

On March 20, 2017, Vodafone announced an agreement to combine its subsidiary, Vodafone India (excluding its 42 percent stake in Indus Towers), with Idea Cellular. The transaction is subject to regulatory approvals and is expected to close during calendar 2018. The combined company will be jointly controlled by Vodafone and the Aditya Birla Group. Vodafone India has been classified as discontinued operations for Group reporting purposes. From an operational perspective, the Group remains highly focused on the management of business and committed to its success, both prior to the completion of the merger and thereafter.

Data browsing revenue declined by 16 percent in Q4 compared to +0.6 percent in Q3. Active data customer base returned to growth in the quarter, increasing to 66.9 million (Q3: 65.0 million), mainly reflecting a 2.7 million increase in the company’s 3G/4G customer base to 37.7 million (adding 10 million customers in the year). Unit prices declined 38 percent year-on-year (Q3: –11 percent), although this helped to stimulate 40 percent growth in monthly data usage per 3G/4G customer to 636MB (Q3: 505MB).

Voice revenue declined 13 percent in Q4 (Q3: –3.0 percent) as the benefit of higher incoming volumes and a larger customer base was offset by a 22 percent year-on-year decline in voice prices as the market moved to unlimited voice propositions. Total mobile customers increased 4.4 million in the quarter, giving a closing customer base of 209 million.

Adjusted EBITDA declined 10.5 percent, with a 2.2 percentage point deterioration in adjusted EBITDA margin to 27.3 percent. This reflected lower revenues in the second half of the year and higher costs as a result of 4G network expansion, partially offset by lower intra-circle roaming fees and an underlying reduction in operating costs.

Vodafone India’s net debt as at March 31, 2017 was €8.7 billion (2016: €8.1 billion), including €7.1 billion of spectrum-related debt. During the year, the Group spent€2.8 billion to acquire spectrum in India, funded by the €3.6 billion capital injection noted above. The increase in net debt also reflects negative cash flow and accrued interest costs of €0.8 billion and the adverse translation impact of closing foreign exchange rates on the debt balance of €0.5 billion.

In the first half of the 2017 financial year, the Group recorded a non-cash impairment of €6.4 billion (€5.0 billion net of tax), relating to its Indian business. This was driven by lower projected cash flows within the company’s business plan as a result of increased competition in the market. Impairment testing at March 31, 2017, following the announcement of the merger of Vodafone India with Idea Cellular, gave rise to a partial reversal of that impairment. As a result, the impairment charge for the year reduced to €4.5 billion (€3.7 billion net of tax).

“Indian mobile sector revenues are declining, triggered by tariff wars between Reliance Jio and incumbents. Although TRAI has ended Jio’s latest free Summer Surprise offer, subscribers who had already opted for the offer will still get its benefits, and incumbents’ latest offers will still dilute industry AEPU (average revenue per user) at the upper end of subscribers.”

Deepti Chaturvedi and Akshat Agarwal
CLSA Analysts

Rohit Chordia

“Reliance Jio is an experiment in extreme capitalism and its brute-force-of-capital strategy, reflected in large capital deployment coupled with disruptive-as-it-gets pricing, has already resulted in massive impact on the industry – none bigger than forcing the number 2 (Vodafone India) and number 3 (Idea Cellular Ltd.) players to consider a merger. Jio is perhaps trying to force an extreme endgame where it emerges as a super-dominant player. Generating returns seems to be an after-thought at this point.”

Rohit Chordia
Executive Director and Senior Analyst,(Telecom, Consumers, IT)
Kotak Institutional Equities

Gopal Vittal

“The sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row. The telecom industry as a whole also witnessed a revenue decline for the first time ever on a full-year basis. The deteriorating health of the industry was compounded by the tsunami of incoming voice traffic from the new operator as a result of which significant investments had to be made just to carry the incoming traffic on our network. The net result of this was a revenue decline of 7.1 percent in Q4 even as EBITDA margins eroded by 2.9 percent. FY 16-17 saw a muted top line growth of 3.6 percent versus the double-digit growth witnessed in the preceding years.

Our long-term commitment to provide the best experience to our customers continues to drive all our actions in every single aspect of the business. This belief coupled with brilliant execution of our people has led to acceleration in market share in an industry that is now rapidly consolidating.”

Gopal Vittal
MD and CEO-India & South Asia,
Bharti Airtel Limited

“In the meantime, Idea will remain nimble, agile, adaptive, and focused on its execution capabilities. The company remains confident to capitalize on the emerging opportunities in mobile voice, digital content, mobile banking, and wireless data business as telecom market invariably moves toward consolidation with 5 major providers.”

Annual Report,
Idea Cellular

Raghunath Mandava

“Airtel Africa underlying revenues grew by 4.4 percent in constant currency terms during FY 16-17 with net revenues up a healthy 5.0 percent as we shed unprofitable lines. Revenue market shares in our key geographies continue to accelerate. Our efforts to deliver a profitable business model for Africa has resulted in EBITDA growth of 36.0 percent with margin expanding by +500 basis points on an underlying basis in FY 16-17. For the first time ever, African operation has delivered positive PBT in the financial year (constant currency).

Data consumption and revenues have grown by 95.5 percent and 23.5 percent respectively in FY 16-17. We remain focused on accelerating growth through improved customer experience and superior network quality.”

Raghunath Mandava
MD and CEO, Airtel Africa

Vittorio Colao

“Our strong organic performance in South Africa and Turkey in Africa, Middle-East, and Asia-Pacific (AMAP) region is partially offset by India, where the sector is affected by free services from the new entrant. We anticipate intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions, including the extension of 4G services to 17 leading circles.”

Vittorio Colao
Vodafone Group


Bharat exn


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