Jio effect: Voda pre-tax profit plunges 39% in H1; industry loses a whopping Rs 4,087 cr in Q2 alone
The deep-pocketed Jio has been offering data almost free for a year now, while it charges nothing for voice, forcing the incumbents to make matching offers.
Vodafone India on Tuesday reported a steep 39.2 per cent plunge in pre-tax profit at Rs 4,075 crore for the six months to September, joining its peers who have cumulatively lost Rs 4,087 crore in the second quarter alone, exposing the deep scars in the once-sunshine segment.
The second largest telco squarely blamed the poor set of numbers -- it also reported a 15.8 per cent fall in revenue at Rs 19,002 crore -- to the "continuing price war driven by Jio and other incumbents, seasonality, higher GST rate and the continuous capital investments".
The deep-pocketed Jio has been offering data almost free for a year now, while it charges nothing for voice, forcing the incumbents to make matching offers.
The next quarter will be worse for the old players as in a blow to them, regulator Trai had from October 1 steeply reduced the ICU charges from 14 to just 6 paise. The impact of this decision will come into the books from the third quarter.
And the deep scars that the Jio-led competition has left in its wake was clear when yesterday Idea, which is on course to merge with Vodafone, reported a massive Rs 1,107 crore net loss in September quarter, as its business was hit by pricing pressure and GST introduction in a "challenging" operating environment. Revenue fell 19.72 per cent to Rs 7,465.5 crore.
Similarly, last month market leader Airtel reported a 76.5 per cent plunge in net at Rs 343 crore for Q2 while RCom reported a net loss of Rs 2,709 crore.
On the other hand, Jio reported a net loss of Rs 260 crore in the September quarter and exuded confidence to turn first profit by the December quarter as it had clocked an operating profit of Rs 271 crore.
Vodafone had Rs 22,579 crore in revenues, and an operational profit of Rs 6,704 crore a year ago.
Vodafone managing director Sunil Sood said, "amidst continuing intense competition, we recorded a gain of 0.6 per cent in revenue market share and delivered a stable performance overall. However, we see signs of positive developments with consolidation of smaller operators."
He said data usage has been growing by around 250 per cent, while enterprise business chipped in 19 per cent of revenue for the reporting period. Its data customers rose to 67.7 million, of which 44.6 million use 1MB data at 2.7GB.
But data users of under-1 MB fell by 5.9 per cent to 44.6 million and 3G/4G users jumped 27.9 per cent to 46 million.
Sood attributed higher data usage to rising smartphone penetration at over 38 per cent of total customer base. It added 10 million broadband users.
The bottomline was hit as margins fell to 21.4 from 29.6 per cent and Arpu came down to Rs 146. It did not offer the comparative Arpu for last year.
But rising "data usage which quadrupled during the period" helped it manage an operating free cash flow of Rs 1,543 crore.
However, it increased the revenue market share by 60 bps to 23.1 per cent during the reporting period as its customer base rose 3.3 per cent to 207.4 million. Of this, as much as 114 million are in the hinterland, the company said.
The company however, said it will not scale down its targeted capital investments as it sees margins stabilising going forward.
However, during H1 its capex fell over 13 per cent to Rs 2,915 crore from Rs 3,356 crore.
Vodafone said its enterprise business is growing faster than industry rate. Vodafone is the largest player in the enterprises business and netted 19 per cent of its revenue from this vertical.
Vodafone serves its 207.4 million customers through 1,40,000 masts, of which 1,28,000 are 3G/4G sites.
Over the past weekend, Sood had told PTI that the company saw much more potential in this and would increase its focus on MSMEs and startups to ramp up revenue. This vertical already serves over 6,000 large corporates.
Yesterday, Vodafone said it had decided to sell its 10,100 telecom towers to American Tower for Rs 3,850 crore as part of the merger with process Idea, for which it has already got approvals from the CCI and Sebi, and is awaiting NCLT and DoT approvals.