Vodafone's operating profit slides 10.2% in FY17 after Reliance Jio's entry

Mumbai: Vodafone India today reported a 10.2 percent decline in FY17 operating profit to Rs 11,784 crore on margin contraction primarily impacted by the competitive pressures after the entry of Reliance Jio.

In its financial performance, which comes a week after the largest telco Bharti Airtel, and the third largest operator Idea Cellular reported huge reverses in March quarter numbers, the second largest telco reported a marginal 0.6 percent decline in revenue at Rs 43,095 crore.

Vodafone logo. Reuters

Vodafone logo. Reuters

The British company, which is set to be merged with Idea to create the biggest telco in the country, reported a margin contraction of nearly 3 percentage points to 27.3 percent for the year, indicating the dent inflicted by the near-free data offering by the Reliance group company.

Vodafone's subscriber base increased 5.6 percent to 209 million and the revenue market share increased 0.7 percent in the nine months to December 2016, to 22.7 percent.

The entry and the initial free offerings of Reliance Jio has severely hurt the financials of the incumbents as they seek to protect their customers from moving out.

Traditionally, the voice segment contributes a major chunk of the toplines for the older companies, but Jio is offering free voice in bundled packs focused on data.

Vodafone said data revenue grew 5 percent during the year to Rs 8,467 crore, which is only a fifth of the overall base. Its total data users declined by 1 percent to 66.9 million, and those consuming over 1MB declined at a faster clip of 2.9 percent to 43.5 million.

It had a service average revenue per user (ARPU) of Rs 158 for the March quarter, but the ARPU on data was hit by Jio's entry and fell to Rs 140 from Rs 160.

Bharti's net income plummeted 72 percent in the March quarter and 37.5 percent for the fiscal, while Idea booked a loss of Rs 325 crore for March quarter and Rs 404 crore for the fiscal.

The Vodafone management expressed satisfaction at the performance in challenging times.

"Amidst an unprecedented and intensely competitive environment, we delivered a stable performance in the year," the company's Managing Director and Chief Executive Officer Sunil Sood said.

The service revenue declined 0.5 percent to Rs 42,956 crore for the year, of which 17 percent came from Vodafone Business Services.

The company invested Rs 8,311 crore during the year and its net debt stood at Rs 60,200 crore as on end March. It has 1.41 lakh total sites in the country, of which
1.06 lakh are broadband ones.

The India operations, which was the growth driver for the group for many years in the past, proved to be a drag on the group's global operations, which reported a net loss of Euro 6.1 billion on a 3.7 billion euro tax impairment from India operations.

(Disclosure: Reliance Jio is owned by Reliance Industries, which also owns Network18, the publisher of Firstpost)

Updated Date: May 16, 2017 19:38 PM

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