Idea begins to reap dividends from aggressive pricing strategy

28 Jul 2017

Idea Cellular, India’s third largest cellco by subscribers, has begun to stabilise amidst the intensifying competition following the launch of a disruptive new operator in September 2016. Idea booked total revenue of INR81.67 billion (USD1.27 billion) for its first quarter (ended 30 June 2017), a decrease of 13.9% year-on-year, but flat on a quarter-on-quarter basis. Explaining the improvement, Idea notes that the ‘aggressive tariff offerings’ that it introduced to combat the newcomer’s free or heavily-discounted services led to a ‘steep decline in voice and mobile data realisation rates’, but that this slump was largely compensated by ‘substantial’ volume growth in both segments. Indeed, total data traffic (2G, 3G and 4G) on Idea’s network doubled q-o-q to 252.8 billion MB from 127.0 billion MB in the three months to 31 March 2017 (and compared to 93.1 billion in the year-ago period) but average revenue per MB (ARMB) dropped to INR0.054 from INR0.115 over the same period. Consequently, data ARPU increased from INR110 to INR119 per month.

Nevertheless, rising network costs – amongst other expenses – led to a decline in EBITDA, which reached INR18.75 billion, compared to INR21.20 billion in the preceding quarter and INR30.95 billion in the previous year. EBITDA margin, meanwhile, was 23.0% for the three-month period, down from 32.6% in June 2016. Consolidated net income for the period was a net loss of INR8.16 billion, more than double the loss of INR3.26 billion in the previous quarter and an INR10 billion swing from a profit of INR2.17 billion recorded in Idea’s Q1 2016/17.

Idea reported a slight decrease in its mobile subscriber base, counting a total of 189.0 million users on it books at end-June 2017, compared to 189.5 million three months earlier. Its 3G subscriber base was more heavily impacted by the recent changes in the sector, falling to 19.9 million from 21.6 million in March 2017 and a peak of 27.6 million at end-September 2016. 4G subscriptions, on the other hand, saw strong growth, reaching 6.5 million users at end-June 2017 from 3.1 million three months earlier and 1.8 million in June 2016.

India, Vodafone Idea (previously Idea Cellular)