Mobile operators are seeing a massive erosion in profitability due to the free services being offered by new entrant Reliance Jio.
The latest quarterly numbers of three listed telecom companies have seen a huge dip in profits, with Idea Cellular reporting losses for the first time since its IPO in 2007. The company reported net loss of ₹492.28 crore on a standalone basis for the third quarter ended December 31, 2016, compared with a net profit of ₹636.03 crore in the year-ago period.
Anil Ambani’s Reliance Communications (RCom) suffered a net loss of ₹531 crore during the quarter. Bharti Airtel, the country’s largest operator, saw a 54 per cent fall in consolidated net profit. All three companies have blamed RJio’s free services for the decline in numbers.
“The Indian mobile industry witnessed an unprecedented disruption in the quarter of October-December 2016, primarily due to free voice and mobile data promotions by the new entrant in the sector. Consequently, revenue KPIs and financial parameters for all mobile operators have sharply declined, and for the first time in its history the flourishing Indian wireless sector is trending towards an annual revenue decline of 3-5 per cent in FY17 (vs FY16),” said Idea Cellular.
Idea was forced to reduce its voice rates by 10.6 per cent (on sequential quarterly basis) to 29.6 paisa per minute ( 33.1 paisa in Q2 FY17) and drop its mobile data rates by 15.2 per cent to 15.9 paisa per megabyte (18.7 paisa in Q2 FY17).
For the first time, Idea witnessed a decline of 5.5 million mobile data customers on a sequential quarter basis with overall mobile data subscriber base receding to 48.6 million (54.1 million in Q2 FY17).
For Airtel, India revenues for the third quarter, at ₹18,013 crore, grew 1.8 per cent over figures in the year-ago.
Gopal Vittal, Airtel’s MD and CEO for India & South Asia, said: “The quarter has seen turbulence due to the continued predatory pricing by a new operator. The present termination cost at 14 paise, which is well below cost, has resulted in a tsunami of minutes terminating into our network. This has led to an unprecedented year on year revenue decline for the industry, pressure on margins and a serious impact on the financial health of the sector.”