Q2 Results: Vodafone Idea Posts India’s Largest-Ever Quarterly Loss

Vodafone Idea Ltd. posted India’s largest-ever quarterly loss in the second quarter as the telecom operator provided for Rs 25,678 crore as dues pending to the government related to the 14-year-old adjusted gross revenue court dispute.

Net loss widened to Rs 50,922 crore in the July-September period, the company said in an exchange filing. That compares with Rs 4,994-crore loss in the first quarter. The firm posted an exceptional loss of Rs 30,700 crore.

The company’s ability to continue as going concern is dependent on obtaining reliefs from the government, the telecom operator disclosed in notes to accounts of the financial statement.

Vodafone Idea’s revenue fell 3.8 percent on a sequential basis to Rs 10,844 crore for the July-September period.

Other Highlights:

• Operating profit was down 8.3 percent to Rs 3,347 crore
• Operating margin contracted 150 basis points to 30.8 percent.
• The firm wrote off deferred tax assets worth Rs 13,936 crore.
• Average revenue per user stood at Rs 107 compared to Rs 108 in June quarter.
• Exceptional loss includes merger-related costs of Rs 275 crore and additional depreciation of Rs 4,822 crore.
• The operator is in the process of filing a review petition for the apex court’s AGR judgment.

The company has estimated a liability of Rs 27,610 crore towards license fees and Rs 16,540 crore towards spectrum usage charges payable based on the outcome of AGR case. However, during the quarter, the company has only provided for Rs 25,678 crore as charge towards the liability—after adjusting the available provision and potential payments, on the satisfaction of contractual conditions, under a mechanism with Vodafone Group Plc, the press release filed along with the earnings said.

The company is liable to receive the remaining Rs 18,472 crore from Vodafone Plc, a Vodafone Idea official told BloombergQuint on the condition of anonymity.

Earlier this week, Vodafone Group Plc CEO Nick Read said that the firm’s India venture may be headed for liquidation until the central government eases the demands for the spectrum fees. The government, however, expressed displeasure and disapproved over the remark made by the executive.

On Oct. 24, the Supreme Court ruled that Indian telecom operators have to pay adjusted gross revenue as spectrum usage charges and license fees to the telecom department.

The apex court has ordered Vodafone Idea to pay about to pay Rs 28,309 crore after a ruling directed that India’s telecom operators will have to include non-core revenue to calculate levies, dealing a crippling blow to the bruised industry that stares at dues and penalties worth thousands of crore.

Rajan Mathews, Director General of Cellular Operators Association of India, said the industry needs to get to the bottom line of the issue. “Promoters have to ask if we keep pumping in money into these enterprises, what is the rate of return we can expect going forward?” he told told BloombergQuint.

The government needs to fix the legacy issues of sharing revenue after charging heavily for the spectrum, he said, in order to maintain a healthy competition within the industry. “The government takes 30 percent off the top, there is no other industry where the government does this.”

Watch | the conversation with Rajan Mathews here...