Telecom operators Bharti Airtel and Vodafone Idea have reported record losses for the quarter ended September 30 after they made heavy provisions for outstanding government dues, arising from a Supreme Court verdict on annual gross revenue.
The apex court on October 24 had asked the telecom companies to pay the government Rs 92,000 crore in dues, which includes penalties and interest. The SC upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.
Vodafone Idea posted a Rs 50,921 crore loss for the quarter in the highest ever quarterly loss posted by any Indian company in recent memory. The losses included a provision of Rs 25,680 crore over government dues. Bharti Airtel reported a consolidated net loss of Rs 23,045 crore after making made a provision of Rs 28,450 crore, more than 92 percent of the overall charge for exceptional items, after the Supreme Court ruling.
In Q1FY20, Vodafone Idea reported a net loss of Rs 4,874 crore. Bharti Airtel had recorded a net profit of Rs 119 crore in Q2FY19.
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.
Airtel CEO, India and South Asia, Gopal Vittal hoped that the government will take a considerate view on the adjusted gross revenue (AGR) matter given the "fragile state of the industry". "On the AGR verdict of the Supreme Court, we continue to engage with the government and are evaluating various options available to us," he said.
"Vodafone results are a reflection of the company’s inability to compete effectively in a three-player market," Reuters quoted Deepa Dasani of HDFC Securities as saying. "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."
The apex court will also pass a separate order on the specific time frame for the telecom companies to pay their dues.
The telecom companies have disputed the definition of adjusted gross revenue (AGR), forming the basis for both spectrum charges and licence fee, paid to the government. According to the DoT, the AGR should include dividends, handset sales, rent and profit from the sale of scrap besides revenue from services.
The apex court said that most of the things will come under the government's definition of AGR and telecom companies shall have to pay up.As per latest estimates by the telecom department, Bharti Airtel faces a liability of around Rs 62,187 crore, while Vodafone Idea may have to pay about Rs 54,184 crore. The remaining liability is with state-owned BSNL/MTNL and some of the shut/bankrupt telecom companies.