news


Idea earnings show merger can’t come soon enough

Wife comforting her husband

Idea Cellular has reported its latest quarterly figures and they don’t make for good reading. The Vodafone merger seemingly can’t happen quickly enough.

Total revenues for the quarter demonstrated an 8.6% quarter-on-quarter decline, while year-on-year revenues decreased by an breath-taking 19.7%. After making a handsome profit of $660 million in the same quarter of 2016, the team swung to a loss of $180 million for the last three months. Market share has also declined from 19.4% to 18.9% over the 12 month period. Not many of the figures are heading in the right direction.

“While seasonal industry slowdown followed the past trends, as always ‘July to September 2017 quarter’ impact on Idea’s subscribers and revenue loss was more pronounced given its higher share of rural subscribers,” Idea said in a statement.

“This coupled with continued pricing pressure and GST change, resulted in overall company revenue declining to Rs. 74,654 million, a reduction of 8.6% compared to Rs. 81,665 million in Q1FY18.”

The decline in the fortunes of not only Idea, but the other big boys in Airtel and Vodafone, does not necessarily demonstrate poorly run businesses, more they weren’t ready for any change. This might be considered just as bad, this is the digital age after all where flexibility and agility are prominent buzzwords, but they were just completely un-prepared for any disruption to a stable pricing structure. Few people are ready for disruption, but looking back, many would point to perfect conditions for disruption in India.

Since the introduction of Reliance Jio, Idea has moved towards the unlimited voice and more generous data bundling options, but as you can probably see, the business is operationally not ready for it. If it was, the swing in fortunes over 12 months would not be so severe.

Perhaps the merger, and the efficiency benefits which scalability will offer, cannot come soon enough for a company which seems to be on the tip of a negative trend in profitability. A $180 million loss might sound bad right now, but it would surprise few if this continues to go downwards.

On the merger, things do seem on track. The pair have started collecting green lights from all the relevant regulatory bodies. Approval is still needed from the National Company Law Tribunal, and a few other organizations, but there haven’t been any major roadblocks so far.

Things are not going well right now, but maybe that doesn’t matter that much. The new combined business will create the country’s largest operator, and after this morning’s announcement to sell the tower businesses to ATC Telecom Infrastructure, the pair will be $1.2 billion richer. Perhaps it is a case of close the eyes, cover the ears and hold the breath, until the merger has been completely cleared.


Leave a comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Polls

How have open source groups influenced the development of virtualization in telecoms?

Loading ... Loading ...