Vodafone Idea Posts Rs. 51,000 Crores Net Loss, the Highest Ever by an Indian Firm

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-September stood at Rs. 1,17,000 crores. 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.

"Apart from its impact on its equity value, this result will surely result in wider financial repercussions because it will hit the lenders and debt investors in the company, including mutual funds."

Analysts on average expected Vodafone Idea to report a consolidated net loss of Rs. 4,422 crores for the quarter, according to Refinitiv data, although those figures did not include the charge.

The wireless carrier had posted a net loss of Rs. 4,974 crores a year ago.

Vodafone Idea's consolidated revenue from operations for the quarter rose 41.4 percent year-on-year to Rs. 10,844 crores.

On Thursday, Vodafone Idea said it plans to sell its 11.15 percent stake in mobile mast operator Indus Towers once its merger with Bharti Infratel receives regulatory clearances.

Bharti Airtel's MD and CEO, India & South Asia, Gopal Vittal said: "We continue to engage with the government and are evaluating various options available to us."

"We are hopeful that the government will take a considerate view in this matter given the fragile state of the industry," Vittal said.

Analysts on average expected Bharti Airtel to report a loss of Rs. 1,116 crores for the three months to the end of September, according to Refinitiv data.

Bharti, which runs operations in South Asia and Africa, said its Indian revenue rose 3 percent year-on-year to Rs. 15,361 crores.

Earlier on Thursday, Singapore-based Singtel posted a second-quarter loss of SGD 668 million ($491.29 million) hurt by a one-time charge recorded by Bharti.

Singtel is the biggest shareholder in Bharti Airtel, with an effective stake of about 35 percent.

© Thomson Reuters 2019