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Idea Cellular Swings to Profit in June Quarter on Tower Sale Gain

Kumar Mangalam Birla controlled-Idea Cellular Ltd on Monday reported its first quarterly net profit after six quarters of losses, on the back of a one-time gain on the sale of its 9,900 standalone telecom towers to ATC Telecom Infrastructure Pvt Ltd in May.

Idea Cellular reported a consolidated net profit of Rs256.5 crore for the June quarter, compared to a loss of Rs814.9 crore a year ago.

The company’s consolidated revenues from operations fell 27.9% to Rs5,889.2 crore on the back of the ongoing tariff war in the telecom sector and a steep reduction in domestic and international mobile termination charges (MTC) settlement rate.

According to a Bloomberg poll of 11 analysts, India’s fourth-largest telecom operator was expected to post a June quarter loss of Rs1,528.6 crore on sales (operational revenue) of Rs5,967.5 crore.

If not for the gain of Rs3,364.5 crore on its tower sale, Idea would have reported a loss of Rs3,108 crore for the three months ended June, a back-of-the-envelope calculation from the firm’s regulatory statement shows.

Telecom operators, already reeling from a fierce price war that started with the entry of Reliance Jio in September 2016, were hit hard in the December quarter, and subsequently the June quarter, after the telecom regulator’s decision to slash interconnection usage charges (IUC) levied by mobile networks handling incoming calls from rival networks.

The revenue for the quarter was impacted mainly on account of down-trending of the average revenue per user (ARPU), Idea Cellular said, adding that ARPU for the quarter stood at Rs100 compared to Rs105 in the March quarter.

During the June quarter, Idea Cellular’s competitors reported subdued ARPUs due to aggressive pricing prevalent in the industry. Bharti Airtel reported an ARPU of Rs105 for its India operations during the quarter. Reliance Jio, the telephony arm of Reliance Industries Limited reported an ARPU of Rs134.5 for the June quarter.

Meanwhile, monthly broadband data usage per subscriber rose sharply to 8GB in Q1FY19 compared to 3GB a year ago, voice minutes grew by 39.4% to 349.5 billion from 250.7 billion minutes in the corresponding quarter last year, the statement from Idea Cellular showed.

Despite this, Idea’s subscriber base fell by about 6.6 million individuals to 187.9 million from 194.5 million in the March quarter, reversing the net addition of 6 million subscribers during the March quarter, the firm said.

Idea Cellular hopes that long-term opportunities in the sector will continue to remain attractive while near term challenges persist.

“Once the current phase of below-cost tariffs is over, it is inevitable that the industry ARPU will revive,” the firm said, adding that low rural penetration, improving adoption of data users, and SIM consolidation augur well for the telecom sector in the long-term. – Live Mint

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