Sunil Bharti Mittal, the founder of Bharti Enterprises. Photo: AFP

A recent Indian Supreme Court ruling extending the scope of adjusted gross revenue calculation for mobile phone companies has cast a long shadow over telecom players Vodafone Idea and Bharti Airtel, with both announcing their quarterly results on Thursday.

The court had upheld the government’s position to include revenue from non-telecommunication businesses while calculating the annual adjusted gross revenue of telecom companies. The two companies are the worst hit by the court ruling.

Vodafone Idea, which has been posting losses for the past 11 quarters, reported a loss of 509 billion rupees (US$7 billion) for the September quarter, the biggest in Indian corporate history. This was nearly double the previous record held by Tata Motors (269 billion rupees, or $3.74 billion) in the December quarter of2018.

Bharti Airtel also posted its highest loss ever of 230.45 billion rupees ($3.2 billion) during the September quarter.

The two results highlight the pain felt by Indian telecom operators as they battle high levels of debt, a bruising price war unleashed by billionaire Mukesh Ambani’s Reliance Jio Infocomm and the recent adverse court verdict.

Vodafone Idea has taken a one-time charge of 256.80 billion rupees and its revenue from operations more than halved to 108 billion rupees from 221 billion rupees in the year-ago quarter. It had last year posted a loss of 49.5 billion rupees.

The company was formed by the merger of Vodafone Group Plc’s Indian unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd, but hasn’t seen any profit since the deal was announced in 2017. It is now saddled with $14 billion of net debt.

Vodafone Idea is now fighting for survival after the Supreme Court order. The company stated that its ability to continue as a going concern is dependent on obtaining relief from the government and it was in touch with the officials concerned.

Also Read: Vodafone chief threatens exit from India

Earlier this week Vodafone PLC Chief Executive Officer Nick Read told reporters in London that the situation was ‘critical’ and unless India eases off on its demands, the venture may be headed for collapse. He had also ruled out any more funding for the Indian venture.

Vodafone has reportedly sought a two-year delay on spectrum payments and lower license fees and taxes. It’s also called for the spectrum payment demanded by the court to be spread over 10 years and is asking for waiver and penalties.

Bharti Airtel, which has also been hit hard by the Supreme Court ruling on statutory dues, has provisioned 342 billion rupees to cover adjusted gross revenue related liabilities.

It comprises a principal of 87 billion rupees and interest of 154.5 billion rupees, a penalty of 37.6 billion rupees and interest on penalty of 63 billion rupees as of September 30. The company said it was looking at various options to seek relief.

The Sunil Bharti Mittal promoted company had reported a 4.7% increase in consolidated revenue at 212 billion rupees in the just-concluded quarter. The company had initially planned to declare its results last month but had deferred following the Supreme Court ruling.

Bharti Airtel said while the net loss after exceptional items was 230.45 billion rupees, before exceptional items the loss was 11.23 billion rupees. The company said it will continue to engage with the government and is hopeful of relief.

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