Vodafone Group Plc has said the condition of its joint venture in India – Vodafone Idea – remains “critical” and it is seeking relief in regard to the payment of adjusted gross revenue, which was ordered by the Supreme Court.
The UK-based telecom company said in its earnings release that it was seeking relief from the Indian government in regard to the payment of court-mandated charges in a sustainable manner, Economic Times reports. The company wants the government to ease the payment norms so it can meet its other commitments.
New revenue computation norms arrived at by the court saw the scope of adjusted gross revenue widened to include income from non-core items. The dispute arose when telecom companies migrated to new system offered by the government in 1999, under which operators agreed to share a certain percentage of revenue with the government.
This legal case dragged on for 14 years, with operators arguing that the revenue should be made up of income from telecom services. But the Department of Telecommunications said it should include all revenue earned by an operator, including non-core telecom operations. The court delivered its judgment last October in favor of the department.
To comply with the judgment, Vodafone Idea needs to pay over 530 billion rupees (US$7.45 billion) for its license fee, spectrum usage charge, interest and penalty dues to the department.
Some 15 telecom companies need to pay around 1.47 trillion rupees ($20.6 billion).
Vodafone Idea, along with Bharti Airtel and the now-defunct Tata Teleservices filed a modification petition in the Supreme Court, asking that they be allowed to discuss the modalities and payment timelines with the department.
The three companies face combined dues of 1.02 trillion rupees ($14.33 billion) and hope the payment pattern can be spread over a few years.
In an earnings call in November, Chief Executive Officer Nick Read said Vodafone Idea could face liquidation if it has to comply with the court verdict. The company had written off the carrying value of its share in the loss-making joint venture and Read had pledged not to put any more money into the venture.
Vodafone owns 45% of Vodafone Idea and the joint venture is saddled with debts of $14 billion. It has posted losses for the past 11 consecutive quarters. In the September quarter, Vodafone Idea reported a loss of 509 billion rupees ($7 billion), the biggest in Indian corporate history and nearly double the previous record held by Tata Motors (269 billion rupees, or $3.74 billion) in the December quarter of 2018.
Fellow litigant Bharti Airtel needs to pay 355 billion rupees ($4.99 billion) in dues, but is somewhat better placed than Vodafone. The company raised $3 billion last month from the sale of shares and bonds – $2 billion from qualified institutional placement and another $1 billion from the issuance of convertible bonds.
The operation of the company’s African unit has remained financially strong and it has been profitable for the last eight quarters.
Tata Teleservices owes 138 billion rupees ($1.94 billion) in dues and its parent company Tata Sons may get its flagship, the software giant Tata Consultancy Services, to help pay these dues.