Idea Cellular reported a surprise swing back into profit for Q1FY19. It posted a consolidated net profit of Rs.256.50 crore despite a 28% drop in revenue at Rs.5889 crore. This turnaround after 6 consecutive quarters of losses was thanks to the sale of its 9900 telecom towers to ATC Telecom in May. It earned Rs.3364.50 crore through this tower sale.

If we remove this tower sale, the company was actually in a loss of Rs.3108 crore.

The tariff war after Jio’s entry into the sector is really taking its toll as the company has had to go for steep reduction in prices. What also did not help was the fall in domestic and international mobile termination charges (MTC) settlement rate.

The company’s average revenue per user (ARPU) for Q1FY19 was down to Rs.100 v/s Rs.105 (QoQ).

Idea’s subscriber base fell by about 6.6 million individuals to 187.9 million from 194.5 million in the March quarter, reversing the net addition of 6 million subscribers during the March quarter.

Following this, most brokerage houses have revised their ratings. CLSA has downgraded to ‘Sell’ from ‘Buy’ and cut the target price to Rs.51 from Rs.70. Kotak Securities has maintained ‘Reduce’ with a target price of Rs.75.

The stock is among the top five losers on the BSE, slipping over 5% to Rs.55.30, not too far away from its 52-week low of Rs.48.40. Its LC is at 10% at Rs.52.65.