Idea net loss widens to Rs 1,284 crore as IUC cut hits revenues

Telecom service provider Idea Cellular on Wednesday posted a loss of Rs 1,284.5 crore for the quarter ended December last year, impacted by a cut in interconnection call charges and competitive pricing pressure.

The merger plan with Vodafone India is in the final leg of regulatory approval and expected to be completed in the first half of 2018.

The company had registered a loss of Rs 383.9 crore in the year-ago period. The revenue from operations came in at Rs 6,509.6 crore for the quarter ended December 2017, almost 25% lower than Rs 8,662.7 crore in the same period the previous year.

"The regulation imposed 57% sharp decline in IUC (interconnect usage charges) settlement rates negatively impacted Idea's revenue and Ebitda (earnings before interest, taxes, depreciation and amortisation) for this quarter by Rs 8,200 million (Rs 820 crore) and Rs 2,300 million (Rs 230 crore) respectively," the company said in a statement.

The fall in domestic call connect charges that came into effect from October 2017 aggravated the industry's financial stress. "Therefore, this quarter results are not comparable to the earlier periods," the statement said.

The move to reduce interconnection charges along with the recently announced drop in international mobile termination settlement charges deals "a body blow to all operators and reduces investable funds for the critical Digital India programme".

"The international IUC rate drop only benefits the foreign operators, with no commensurate benefit to Indian consumers but with significant foreign exchange and revenue loss to the Indian exchequer," the statement added.

Idea is in the process of raising up to Rs 6,750 crore equity to strengthen combined entity's (Voda-Idea) balance-sheet. The Board has already approved issuance of 32.66 crore equity shares on preferential basis to the promoter group entities for a total Rs 3,250 crore.

Further, the Board has also constituted a committee to evaluate potential routes for raising additional equity capital of up to Rs 3,500 crore including via preferential issue, qualified institutional placement or rights issue.

"The proposed capital raising of up to Rs 6,750 crore will reduce Idea's net debt and as a result, Vodafone net-debt contribution to the merged entity will also be reduced by a commensurate amount," the statement said.

This, along with the recent sale of standalone tower businesses of Idea and Vodafone India, and the potential monetisation of Idea's stake in Indus towers will augment the long term capital resources of the combined entity, it added.

The shares of Idea Cellular declined 5.38% to end at Rs 94.05 on the BSE.