October 24, 2016 / 12:02 PM / 3 years ago

Idea Cellular profit slumps on competition, costs

MUMBAI (Reuters) - Idea Cellular Ltd, India’s third-largest telecoms operator by revenue, reported an 88 percent slump in second- quarter profit as competition from a new wireless carrier and higher costs weighed.

A man walks past a shop displaying Idea Cellular Ltd's logo on its shutters in Mumbai April 28, 2014. REUTERS/Danish Siddiqui/File Photo

Jio, a venture backed by India’s richest man Mukesh Ambani’s Reliance Industries Ltd, has shaken up country’s telecom sector with free voice and data plans until Dec. 31, forcing carriers such as Idea to cut tariffs to retain clients.

Idea’s spend on expanding its network in India also contributed to the decline in profit.

Idea reported a consolidated net profit of 914.6 million rupees ($13.68 million) in the fiscal second quarter ended Sept. 30, compared with 7.62 billion rupees a year ago, the company said in a statement.

Analysts had, on average, expected a profit of 1.55 billion rupees, according to Thomson Reuters data.

Idea “remains vulnerable to competition given (its) relatively smaller scale and high leverage,” Citi said in a note after the results.

Revenue rose 7 percent to 93 billion rupees from a year ago, but fell nearly 2 percent on a sequential basis, due to declines in voice minutes, and cheaper data and voice plans.

Average revenue per user for voice services fell 6.2 percent on a sequential basis to 122 rupees.

Expenditure increased 14.9 percent to 84.1 billion rupees from a year earlier, and finance charges more than tripled to 10.04 billion rupees.

Idea shares closed 4 percent lower ahead of results in a broader Mumbai market that eked out meagre gains.

($1 = 66.8499 rupees)

Reporting by Sankalp Phartiyal; Editing by Amrutha Gayathri and Jane Merriman

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