India's Idea Cellular posts third straight quarterly loss amid price war

Bruno Cirelli
Luglio 27, 2017

CLSA says that the top 3 incumbents are at high risk from 4G feature phone disruption, given they account for about 60% of all 2G data users who in turn account for a significant part of the around 80% revenue that telcos still derive from voice.

In the course of the call, Vittal mentioned that with 4G attracting more users and 2G still holding up, it is 3G telecom networks that will shut down first in India.

The CEO of India's No 1 phone company also downplayed analysts' views about early signs of stability, saying the telecom market, on the contrary, had actually "shrunk by 6% in the June quarter" amid the continuing price war unleashed by the new 4G entrant, and that it was too premature to get optimistic with no clarity yet on Jio's full pricing structure.

Last week the company announced the launch of the JioPhone, a 4G-capable feature phone that is effectively being offered for free, with the caveat that customers will have to plunk down a deposit of INR1,500 (about $22) that's refundable after three years.

While it's expected that India's major feature phone manufacturers, such as Micromax and Intex, will take a hit from the launch of the device, Reliance Jio is not really interested in starting a manufacturing business.

The JioPhone, they say, creates a new phone segment aimed at millions of low-paid Indians, now caught between basic, calls-and-text devices and fancier smartphones.

On Tuesday, Airtel announced that its net profit declined to Rs367 crore for the three months ended 30 June from Rs1,462 crore in the year-ago period.

" We have no intention to get into subsidising devices and running the inventory as if we own them".

"We believe that this could propel the launch of cheaper phones in the market and that is something that we embrace. We will continue to look at bundling", Vittal said.

Vittal said that the price of the feature phone is on the higher side compared to what is being sold in the market. We need to understand what the terms and conditions are and how customers respond. "We will respond at the right point of time", he said.

Vittal said that aggressive plans of Jio may lead to further consolidation which will benefit Airtel.

"You have seen action in the market already".

Total revenue of Idea also declined by about 14 per cent to Rs 8,181.7 crore in the reported quarter from Rs 9,552.4 crore it posted in the corresponding period of 2016-17.

"The reason that is important is as you come out of this war that is now on, we believe that this market will consolidate behind three players plus the government player, may be four, but perhaps three".

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