Vodafone Idea clocks a loss over $700 million in 3 months as Reliance Jio's price war continues to bite
- Vodafone Idea posted a net loss of ₹4,874 crore, or $700 million, in the first quarter of the current financial year.
- The company’s profit margins though almost doubled to 32.4% from the 15.2% in the fourth quarter ending March 2019.
- Its average revenue per user or ARPU stood at ₹108, which went up by 3.3% quarter on quarter.
Vodafone Idea posted a net loss of ₹4,874 crore, or over $700 million, in the first quarter of the current financial year. In the last quarter ending March 2019, it posted ₹4,881 crore in profits.
On a quarter on quarter comparison, revenues fell by 4.3% to ₹11,269 crore mostly due to customers churn who recharged with service validity vouchers.
The company said that its best customers or those who provide it with high revenues, have ‘down-traded’. It means that they have moved away to cheaper plans or service providers who offer bargains.
‘Benefits not visible on topline’
The company’s profit margins though almost doubled to 32.4% from 15.2% in the fourth quarter ending March 2019.
“We are delivering on our stated strategy, although the benefits are not yet visible in our top line. We are well on track to deliver our synergy targets by Q1 of 2020-21. We expect these factors to increasingly contribute to our financial performance going forward,” said Balesh Sharma, CEO Vodafone Idea.
The company also said that they are working towards integration of Vodafone India and Idea Cellular, which is improving customers’ data experience. “We now lead the league tables on data download speeds in Delhi, West Bengal and Chennai,” said Sharma.
Its average revenue per user or ARPU stood at ₹108, which went up by 3.3% quarter on quarter.
The stock of Vodafone Idea fell by 4.8% in today’s trade ahead of earnings announcement.
Price war rages on
Analysts believe that Vodafone’s fate will largely depend on the pricing strategy of competitors. That means if Jio increases prices, it will create room for others too, to follow suit thereby improving its chances at margins.
At this juncture though, Vodafone Idea can make few mistakes as it is in a tough cash position. “VIL is moving in the right direction by strengthening 4G rollouts, balance sheet through rights issue, stake sale in Indus and potential monetization of fiber assets. That said, low EBITDA, substantially higher leverage and persistent cash burn has put VIL in precarious position with limited room to err. Synergy benefits, substantial 4G sub additions and tariff hikes are essential,” said an HDFC report in May, after its March 2018-19 results.