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Competition, IUC cut pull down Vodafone pretax net 43.5% in Q3

Competition, IUC cut pull down Vodafone pretax net 43.5% in Q3

Mumbai, Feb 1 (PTI) Aggressive pricing by competition, coupled with a steep decline in interconnect charges, has led the second largest telco Vodafone to report a massive 43.5 per cent plunge in pre-tax profit to Rs 1,633 crore in the December quarter.

The company, which is at the final stages of getting approvals for merging with Idea Cellular, had reported a pretax profit of Rs 2,891 crore in the year-ago period.

Its revenues came down 26.58 per cent to about Rs 8,500 crore, while the core service revenue calculated by netting for the impact of forex movement, de-grew 23.1 per cent to Rs 8,110 crore. The service revenues had slid by 17.8 per cent in the preceding quarter.

The key average revenue per user (Arpu) of the largest prepaid segment slid further to 28 per cent as against 24 per cent de-growth in the preceding quarter, the company said.

The key profitability gauge Arpu fall was on increased customer adoption of unlimited packages, continued drag from longer tariff validity periods which extend the timeframe before subscribers top-up and regulatory pressure, the British telecom giant said.

Vodafone Group chief executive Vittorio Colao said, "the competitive and regulatory environment remains intense in the country".

The steep cut in interconnection charges announced by Trai from October 1 last resulted in a 29.2 per cent fall in interconnect fees, the company said, adding if this was excluded, the overall revenue was down only 14.2 per cent.

The pretax profit margin narrowed down sharply to 20.1 per cent from 27.4 per cent in the year-ago period.

During the quarter, the company added 19,300 data sites and the data consumption grew five times due to lower prices to 2.8 GB a month which is higher than that for Europe and the Asia Pacific region.

Its investments went up 5.2 per cent to Rs 2,023 crore during the reporting quarter.

It can be noted that the entry of the deep-pocketed Reliance Jio has wrecked the telecom market since last year, leading to a phase of consolidation, exits and spectrum sales by operators. Practically every companys bottomline is bleeding because of the aggressive play by Jio.

Meanwhile, Vodafone said the approval process for the merger, which now awaits a nod from the telecom department, is making "good progress".

It said the group is committed to infuse necessary capital into the merged entity, in addition to earlier commitments.

As part of the agreement, Vodafone is required to get the net debt at par with Ideas and will also contribute Rs 2,500 crore in capital.

"...any incremental equity raised by Idea prior to the completion of the merger will be matched by the group," it said, adding the combined equity infusion by the two entities will go up to up to 1.8 billion pound.

The merged company will also receive 1 billion pound of proceeds from the sale of Vodafone and Ideas standalone towers to American Tower Corporation and the group continues to explore potential monetisation options for its own and Ideas interests in Indus Towers, the company said. PTI AA BEN BEN