Latest News

For Airtel, Vodafone Idea, a deeper shade of red is a reality
Thursday, August 2, 2018 IST
For Airtel, Vodafone Idea, a deeper shade of red is a reality

The sharp drop in telecom tariffs in the past two years, courtesy Reliance Jio, has wreaked havoc on the financial health of Indian telecom firms

 
 

Mumbai: The sharp drop in telecom tariffs in the past two years has wreaked havoc on the financial health of Indian telecom firms. The surviving telcos are in dire straits. Idea Cellular Ltd reported pre-tax losses of ₹2,817 crore in the June quarter, compared to a profit of ₹ 600 crore in the June 2016 quarter, ahead of Reliance Jio’s launch. Its debt has reached unsustainable levels of 19 times annualised Q1 Ebitda. And although things will get better after the merger with Vodafone India, and the resulting cost synergies, unless substantial equity is brought in, leverage of the merged entity will be at damaging levels.
 
Both companies have lagged far behind Reliance Jio and Bharti Airtel Ltd with respect to investments in their network. Reliance Jio has stepped up investments lately with capital expenditure of ₹ 17,000 crore and ₹ 14,000 crore in the preceding two quarters.
 
 
Idea, with its balance sheet constraints, spent ₹ 7,000 crore on capex in all of financial year 2017-18. The gap is already beginning to show in subscriber numbers.
 
Until recently, when networks of Aircel Ltd and Reliance Communications Ltd were shutting down, Idea and Vodafone had the advantage of increasing subscriber numbers by going after customers leaving those networks. But now, it turns out that they are the most vulnerable among surviving telcos.
 
According to an analyst with a domestic institutional brokerage, Reliance Jio’s incremental market share is largely expected to come at the expense of the Vodafone Idea combine.
 
While Airtel is far better placed in terms of its balance sheet, the deterioration in the profitability of its India wireless business has been equally dramatic. In the June quarter, it reported a loss before tax of around ₹ 2,000 crore, compared to a profit of ₹ 2,340 crore ahead of Reliance Jio’s launch. And things are getting progressively worse. It burnt cash worth ₹4,200 crore last quarter, almost as much as it did in the whole of financial year 2017-18. As pointed above, this is driven by the need to increase data capacities, leading to higher capital expenditure.
 
Reliance Jio, interestingly, appears to be immune from all of the pain in the sector. It has reported profits for its wireless business in the past three quarters.
 
But its accounting has some quirks, including a different depreciation policy compared to peers, making comparisons difficult.
 
 

 
 

It’s best, then, to look at cash burn. On this measure, it leads the charts with cash burn of over ₹40,000 crore in the previous financial year. This includes capex funded by creditors and capitalised interest costs. Put together, incumbents’ cash burn was a fraction of this.

Of course, Reliance Jio is yet to commercially launch its non-mobile businesses such as home broadband, and it remains to be seen how much this segment contributes to overall profits.
 
 

 
 
 
 
 

Related Topics

 
 
 

Trending News & Articles

 Article
Tata Harrier’s 7-seater Version H7X Will Be Quite Different – Report

Tata Harrier’s three-row seat version in works, details out  

Recently posted . 2K views . 0 min read
 

 Article
How to make you car as silent as a Rolls Royce inside

Rolls Royce cars are extremely luxurious. While there are many expensive pieces of equipment in Rolls Royce cars, their most relaxing feature is the silence that ...

Recently posted . 2K views . 2 min read
 

 Article
India's Top 5 Mobile Charger manufacturer Brand 2019

The following list of India's Top 5 Mobile Charger manufacture Brand 2019  

Recently posted . 2K views . 0 min read
 

 Article
Mahindra XUV300 vs Maruti Brezza, Ford EcoSport, Tata Nexon – Price

XUV300 is the latest entrant in the compact SUV segment.

Recently posted . 2K views . 0 min read
 

 
 

More in Electronics & Gadgets

 Article
IndiGo festive sale: Now, grab flight tickets for as low as Rs 999; check routes, details

IndiGo festive sale: Budget carrier IndiGo is offering all-inclusive discounted flight tickets for as low as Rs 999.

Recently posted. 844 views . 0 min read
 

 Article
Maruti Suzuki XL6 launched at Rs 9.80 lakh

6-seater MPV is positioned as a premium alternative to the Ertiga and will be sold from Maruti's Nexa dealership chain.

Recently posted. 1K views . 0 min read
 

 Article
Tata Nexon Creates History With 5 Star Global NCAP Crash Test Rating

The subcompact Tata Nexon SUV has aimed for the stars quite literally! The Nexon has the maximum possible stars with a record-creating 5 star crash safety rating ...

Recently posted. 1K views . 1 min read
 

 Reviews
Best 2.1 Speakers Under ₹2000 in India



Recently posted . 1K views . 61 min read
 

 Reviews
Top Best Window Fans in India – Complete Buying Guide



Recently posted . 1K views . 120 min read
 

 Article
Tata Harrier Dark Edition launched at Rs 16.76 lakh

Dark Edition gets all-black exterior and interior, with darkened trim bits; available in the top-spec XZ variant only.

Recently posted. 1K views . 0 min read
 

 Article
Snapdeal may acquire ShopClues at a likely valuation of $250 million

• This will mark Snapdeal’s first purchase after it re-focused its business to unbranded categories

Recently posted. 749 views . 1 min read
 

 
 
 

   Prashnavali

  Thought of the Day

Life isn’t about falling it’s about getting back up every time you fall.
Anonymous

Be the first one to comment on this story

Close
Post Comment
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST


ads
Back To Top