Q1 Results: Tariff War Hurts Idea Cellular The Most

Reliance Jio Infocomm Ltd. had the best first quarter among peers as its continues to undercut rivals in the world's second-largest telecom market. Idea Cellular fared the worst.

If it weren't for one-time gain of Rs 3,365 crore from the sale of its towers, Idea Cellular would have reported a loss in three months ended June. The average revenue per user of the Kumar Mangalam Birla-led firm fell to a record low of Rs 100. Its operating margins dipped to 11.2 percent, the lowest in at least a decade, due to cost pressures.

The average revenue per user of Reliance Jio narrowed for the third straight quarter at Rs 134.5. But it was better than expected, driven by higher data consumption. Billionaire Mukesh Ambani's upstart also reported its highest revenue growth in the quarter ended June.

Bharti Airtel Ltd., India's largest wireless carrier, has been lowering its tariffs to protect market share to counter Reliance Jio's cheap data war. That, coupled with a reduction in the fee it earned from cross-network calls, lowered its average revenue per user to Rs 105. The Sunil Mittal-controlled company's Africa business, however, continued to grow, according to its exchange filing. Net profit rose 17 percent sequentially on the back of deferred tax assets.

Bharti Airtel doubled its capital expenditure, while Idea Cellular cuts its spend by more than half to Rs 980 crore. Reliance Jio's number was twice the combined capex of its two rivals.

Bharti Airtel's total debt and leverage ratio remained elevated. Idea Cellular's total debt lowered compared to the last quarter. But its leverage ratio rose due to a steep fall in earnings before interest, tax, depreciation and amortisation. With rising capital expenditure, Reliance Jio's total debt increased to Rs 92,000 crore.

Bharti Airtel's average revenue per user declined the most amid a price war, while that of Reliance Jio declined the least on more data consumption. The average revenue per user of Bharti Airtel and Idea Cellular has been declining for at least eight quarters.

Idea Cellular's Ebitda fell as much as 54 percent from the last year—the biggest drop in at least 42 quarters. That of Bharti Airtel fell for the third consecutive quarter, albeit at a slower rate.

Idea Cellular was the only operator to witness a drop in its subscriber base. Bharti Airtel's subscriber base expanded because of Telenor merger. Reliance Jio witnessed the highest ever subscriber addition in the June quarter.

Churn ratio per month, indicating the percentage of customers who discontinued services, declined only for Bharti Airtel. Reliance Jio's churn ratio increased marginally but was still the lowest in the industry. Idea Cellular's churn ratio increased due to a loss in subscribers.

Total data consumption increased for all the three operators. While most data were consumed on Reliance Jio's network, it increased for Bharti Airtel as well. Data consumption on Idea Cellular's network increased 24 percent over the last quarter.