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Idea Cellular reports first-ever loss as telco price war rages

Idea Cellular reports first-ever loss as telco price war rages
Idea shares have surged nearly 47% since the two sides confirmed merger talks on 30 January. Photo by Reuters.
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Idea Cellular Ltd, India’s third-biggest telecommunications operator, reported its first quarterly loss after a new rival forced carriers to cut prices in the highly competitive market.

Reliance Jio Infocomm Ltd, controlled by India’s richest man, Mukesh Ambani, opened for business in September and has shaken the Indian telecoms market with its free voice and cut-price data plans spurring a flurry of similar offers from incumbents led by Bharti Airtel Ltd.

That has increased costs, eroded margins and even forced Vodafone Group Plc’s Indian unit to talk to Idea about combining their businesses, potentially creating the market’s biggest carrier.

Idea, part of the Aditya Birla Conglomerate, on Saturday said it had a consolidated net loss of Rs.3.84 billion ($57.47 million) in its fiscal third quarter ended 31 December, compared with a net profit of Rs.6.59 billion a year earlier.

The loss was slightly bigger than analysts’ expectations of Rs.3.71 billion, according to newswire Thomson Reuters data.

The core telecom operations loss, without including its stake in a telecom tower joint venture, was even higher at Rs.4.79 billion on a standalone basis, Idea said, and was the first-ever quarterly loss since June 2006.

Idea said in a statement it cut mobile voice rates by 10.6% and data prices by about 15% in the December quarter to retain its customers.

Revenue declined 3.8% from a year earlier to Rs.86.63 billion in the December quarter, while expenditure rose 10.3% to Rs.84.63 billion, Idea said.

Smaller rival Reliance Communications also reported on Saturday a consolidated net loss of Rs.5.31 billion for the third quarter ended December. It also blamed competition among other factors for the loss.

Bharti Airtel, the top Indian telecommunication carrier, reported its lowest quarterly profit for four years last month, hit by the price war.

 

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