By | November 15, 2019
Vodafone Idea Posts Rs. 51,000 Crores Net Loss, the Highest Ever by an Indian Firm

Highlights
  • Vodafone Idea reported the biggest quarterly loss in India’s history
  • Supreme Court last month upheld a demand by DoT
  • Carriers will have to pay Rs. 92,000 crores in overdue levies, interest

Vodafone Idea on Thursday reported the biggest quarterly loss in India’s corporate history after making provisions for outstanding government dues.

Vodafone Idea, made up of the local unit of Vodafone Group and billionaire Kumar Mangalam Birla’s Idea Cellular, reported a consolidated net loss of Rs. 50,900 crores in the second quarter to September.

The company took a charge of Rs. 25,678 crores for the quarter after the Supreme Court last month upheld a demand by the telecoms department that wireless carriers pay Rs. 92,000 crores in overdue levies and interest.

Vodafone Idea and rival Bharti Airtel, two of India’s three main mobile carriers, will have to pay a bulk of this state demand.

Bharti Airtel on Thursday reported a consolidated net loss of Rs. 23,045 crores in three months to September.

Bharti said it made a provision of Rs. 28,450 crores, more than 92 percent of the overall charge for exceptional items, after the Supreme Court ruling.

Telecom providers in India pay the Department of Telecommunications (DoT) nearly 3-5 percent of their adjusted gross revenue (AGR) in usage charges for spectrum or airwaves and 8 percent of AGR as licence fees.

The DoT and the mobile carriers have been at odds over the definition of AGR. The companies argue that AGR should comprise just revenue accrued from core services, while the DoT says AGR should include all revenue.

The Supreme Court last month upheld the DoT’s view on AGR.

Vodafone Idea said it was in active discussions with the government seeking financial relief and also in the process of filing a review petition with the Supreme Court.

“It is to be noted that our ability to continue as a going concern is dependent on obtaining the reliefs from the government… and positive outcome of the proposed legal remedy,” Vodafone Idea said in a statement.

The company’s gross debt at end-Sept. stood at 1.17 trillion rupees. Analysts have previously warned that Vodafone Idea will be the worst hit after the Supreme Court ruling given its already stretched balance sheet.

“Vodafone results are a reflection of the company’s inability to compete effectively in a three player market,” said Deepak Jasani of HDFC Securities.