Airtel Postpones Second-Quarter Results as Sector Stares at Massive Payouts

Bharti Airtel said on Tuesday it would need more time to release its September-quarter earnings report, as the Indian company weighs the impact of a recent court ruling asking telecom firms to pay Rs. 92,151.15 crore in dues to the government.

The company's board, which met earlier in the day, accepted the management's recommendation to shift the September-quarter results to November 14, the telecom operator said.

Shares of New Delhi-based Airtel, which was expected to release its quarterly numbers later in the day, dropped as much as 4.22 percent, while smaller rival Vodafone Idea fell 9.52 percent.

Both companies have been steadily losing subscribers to Reliance Industries-owned Jio.

India's Supreme Court last week upheld a demand by the country's telecoms department (DoT) that wireless carriers must pay Rs. 92,000 crore rupees in overdue levies and interest.

Airtel said on Tuesday it has approached the DoT to "seek clarity" on the amount it had to pay, adding that it has sought the government's support to deal with the "adverse outcome" of the court ruling.

Vodafone, already lugging over Rs. 99,228.50 crore in debt as of the previous financial year, said in a statement dated October 25 that it would engage with the regulator for relief, including a waiver of interest and penalties.

"The amount involved is pretty huge. If this goes on, (then) Vodafone could go bankrupt," said Rusmik Oza, Head of Fundamental Research at Kotak Securities.

The total debt in the sector is about 4 trillion rupees, according to trade body Cellular Operators Association (COAI) of India.

"The Supreme Court's judgment is the last straw in contributing to financial distress and it remains to be seen whether the industry will be able to recover from this setback," COAI said in an emailed statement.

Sector Consolidation
India's telecom sector has reduced to only four large players currently operating from about 10 a decade ago. That includes the state-owned Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd, which merged last week.

The court-ruled fee payments would further consolidate the industry and leave only two companies, namely Airtel and Jio, analysts told Reuters.

"Telecom usage in India is pretty high. So if it falls in the hands of only a few players, it is not good," said Vinod Nair, Head of Research, Geojit Financial Services.

"The government has to look into this."

Kotak's Oza echoed the sentiments, adding that for good competition, the sector needed at least three players, if not four or five.

Jio, launched in 2015, is a relatively new player and would face a lighter burden in terms of levies.

"We have to wait and see how it plays out, but Reliance (Jio) will have much less to pay," Oza added.

Jio's parent Reliance shares were up 2.35 percent on Tuesday.