India's Idea Cellular posts quarterly loss; to sell tower unit

Idea Cellular has posted a consolidated net loss of Rs 1,106.80 crore for the second quarter (July-September) of 2017-18 fiscal.

After Vodafone India and Idea complete their merger, 6,300 company-located tenancies of the two operators on the combined standalone tower businesses will collapse into single tenancies over a period of two years without the payment of exit penalties.

The Mumbai-based company's service revenue declined 15.8% to Rs19,002 crore; Ebitda (earnings before interest, taxes, depreciation and amortization) declined 39.2% to Rs4,074 crore; and Ebitda margin narrowed 8.2 percentage points to 21.4%, even as the company cut down on capital expenditure by 13% to Rs2,915 crore.

"Amidst continuing intense competition, we recorded a gain of 0.6ppt in RMS in Q1FY18 (YoY) and delivered a stable performance overall".

By the end of the period, Vodafone India's operating cash flow was at Rs 1543 crore and the company's capex investment stood at Rs 2915 crore. We see signs of positive developments with consolidation of smaller operators.

Vodafone started deconsolidating results after earlier announcing an agreement to combine Vodafone India (excluding its 42 percent stake in Indus Towers), with Idea Cellular.

The company said it has garnered almost 20.7 crore subscribers at the end of September which it said was 3.3% increase YoY. However, it said the company's service revenue Arpu (average revenue per user) took a beating due to stiff price competition and it now stands at Rs146 per user.

Data traffic on its mobile network also grew as the company unleashed a host of data benefits under bundled data schemes.

"Robust performance by strategic business areas with Data usage growing by c.250% Q2FY18 YoY; Vodafone Business Services now contributing to c.19% of Service revenues", the company said.

Vodafone India has also agreed to sell its standalone tower business to ATC Telecom for an enterprise value of 38.50 billion rupees.

"This transaction follows the Vodafone India/Idea merger announcement of 20 March, 2017 whereby the parties announced their intention to sell their individual standalone tower businesses to strengthen the balance sheet of the combined business", it said.

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