The management believes there is scope for improvement. These could be in sales and general administration, online recharge, electronic Know Your Customer and lower churn rates after consolidation. On the network front, upgrading of the 2G and 3G sites to 4G technology should help contain network expansion costs.
While it operated efficiently in the quarter, Idea Cellular is trailing peers on revenue and in adding customers, especially in the broadband segment. Increased adoption of bundled plans, with unlimited calling and high data usage at lower rates, has dented its voice and data realisations.
While Bharti’s mobile revenues were down 3.3 per cent, Idea's revenue decline, led by a 9 per cent erosion in average revenue per user, has been 6 per cent.
Idea’s broadband net additions at 5.2 million are flat (quarter-on-quarter) while Airtel’s additions more than doubled to 14.4 million in the March quarter, compared to 7 million in the December one. Data traffic of Bharti Airtel at 4 billion gigabytes is double of Idea's.
Reliance Jio is way ahead of both; its subscriber addition is two-six times and data traffic is two-eight times of the other two. While Idea has some catching up to do and has indicated it will not participate in rate wars beyond a point, the key event for the Street is the pace of the merger; before the current quarter will be a big positive.
Analysts at JM Financial said the buys argument for the company's stock would depend on flawless post-merger integration, savings on spectrum liberalisation charges, tower penalties, and financing of upcoming liabilities. While merger synergies will help, the single biggest trigger continues to be gradual uptick in rates.