During the quarter, there was a gain of Rs 33.65 billion from the sale of tower assets. On a sequential basis, revenue declined 2.9 per cent. The Ebitda for the quarter came in at Rs 6.6 billion, down 65 per cent YoY.
Analysts say the results prove that Idea’s under-investment of the last 12-18 months compared with Airtel and Jio is starting to impact its market share. Idea lost 6.6 million subscribers in Q1 and added 1.1 million broadband users (3G+4G) which is significantly below 12.4 million added by Jio and 9.1 million by Airtel. Also, data volume increased by 24 per cent QoQ vs 40 per cent QoQ growth reported by Airtel.
Airtel had recently indicated that the ARPU of a 2G sub potentially more than doubles in graduating to 4G. Therefore, analysts feel it is essential for Idea to get its fair share of subscribers to upgrade to 4G in order to improve headline ARPUs if overall industry pricing does not improve.
“Investment programme trailing behind peers. Idea has added 43,212 mobile broadband sites since 1Q FY18 (last five quarters), well below the 116,698 added by Bharti Airtel. Likewise, its total optic fiber network spans 158k km, far short of Bharti’ Airtel’s 246k,” JP Morgan
As per Jefferies, capex post-merger will have to increase substantially compared to peers to match the capacity generation of peers. “We expect ARPU to see further declines, led by downgrades and possible pricing competition, especially in postpaid and voice segments. Further, with Idea+Voda losing postpaid subs, we expect blended ARPU to see a sharper fall,” Jefferies added.
The net debt for the combined firm is likely to be Rs1.04 trillion (Rs 505 billion for Idea + Rs 530 billion for Vodafone) with a combined EBITDA of Rs15 billion.
“Both Idea and Vodafone have demonstrated the archetypal conservative behaviour of two debt-stressed firms ahead of a significant merger. Unsurprisingly, customer churn at Idea also increased. Gains from the sale of Idea’s towers to ATC prevented significant losses at the PAT level, besides helping to reduce net debt by Rs 17 billion to Rs 506 billion,” JP Morgan
As per Deutsche Bank Research, Jio's commentary in its recent analyst meet suggests that it is likely to maintain an aggressive stance to transition feature phone subscribers to its network via attractive handset offers. “While we expect revenue trends to remain weak in the near term, the mergeco should gain from opex synergies to aid margins,” it added.