Reliance Jio disconnects British Vodafone's FY17 profit by 10.2%
16 May 2017 4:54 PM GMT
Vodafone India on Tuesday reported a 10.2 per cent 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 per cent decline in revenue at Rs 43,095 crore.
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 per cent 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 per cent to 209 million and the revenue market share increased 0.7 per cent in the nine months to December 2016, to 22.7 per cent.
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 per cent during the year to Rs 8,467 crore, which is only a fifth of the overall base. Its total data users declined by 1 per cent to 66.9 million, and those consuming over 1MB declined at a faster clip of 2.9 per cent 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 per cent in the March quarter and 37.5 per cent 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 per cent to Rs 42,956 crore for the year, of which 17 per cent 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.
InfoTech industry going for big job cuts? Not really, says Govt
The Indian government on Tuesday said IT industry has assured it that there will be no large scale job losses in the technology sector which continues to demonstrate 8-9 per cent growth.
IT Secretary Aruna Sundararajan said there could be some cases were contracts are not renewed as part of the regular annual appraisal cycle. Besides, she said, the industry is also undergoing a shift in the job profile given the advent of cloud, big data and digital payments.
"Some of the companies which have been named (as undertaking job cuts) have clarified that there is nothing big this year," she said on the sidelines of Broadband India Forum event.
Sundararajan added: "As part of annual appraisals, they may not be renewing contract of some people but it is absolutely incorrect to assume that suddenly this year a large number of jobs are being shed."
The government has categoric assurance from the industry in this regard, she emphasised. The industry is growing at 8-9 per cent and there is nothing to suggest that the growth is going to slow down "dramatically".
IT sector, she said, will continue to hire and has added 5 lakh jobs in the last 2.5 years. The issue needed to be looked at "holistically", she added.
Over the past few weeks, there have been reports of layoffs across the IT sector. Tech majors like Wipro, Infosys, Cognizant, and, more recently, Tech Mahindra have initiated annual performance reviews, a process that weeds out bottom performers or non performers.
There are fears that thousands of employees in the sector could be shown the door over the next few weeks.
The development comes at a time when Indian IT firms are facing challenges in the business environment and stricter work permit regime in countries like the US, Singapore, Australia and New Zealand.
That apart, executive search firm Head Hunters India said recently that job cuts in IT sector will be between 1.75 lakh and 2 lakh annually for next three years due to under- preparedness in adapting to newer technologies.
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