Vodafone Idea, Airtel post record loss of over $10 billion

Telecom giants Vodafone Idea Ltd and Bharti Airtel Ltd have posted record losses in the September quarter, ravaged by the Supreme Court verdict that upheld the government’s broader definition of revenue on which it calculates levies on telecom operators.

[Telecom operators pay levies such as license fees and spectrum usage charge (SUC) as a share of their revenue to the government. These payouts are calculated as a percentage of the adjusted gross revenue (AGR). The Department of Telecommunications (DoT) believes that such charges be levied on the basis of entire revenues earned by a telco – including non-telecom related sources such as deposit interests and asset sales.

On contrary, service providers say that AGR should consist of revenues generated from telecom services only.

The Supreme Court of India ruled in favour of DoT upholding that the telecom companies’ entire revenue should be considered while imposing the license fee and SUC.]

The Supreme Court order marked the end of a 14-year legal tussle between the department of telecommunications (DoT) and telecom operators.

The quarterly loss for both Vodafone Idea and Airtel sums up ₹74,000 crore ($10 billion).

Vodafone Idea’s loss for the September quarter widened to ₹50,922 crore from ₹4,874 crore in the year earlier, as it set aside money to pay dues to the government following last month’s adverse court order. Vodafone Idea’s loss is roughly five times its consolidated revenue from operations.

Rival Bharti Airtel Ltd too posted a massive loss, its highest and second quarterly loss in 14 years. The operator posted a ₹23,045 crore loss in the quarter ended 30 September from a profit of ₹118 crore in the year earlier.

Airtel said it would require additional financing to meet the liabilities arising from the court verdict.

Vodafone Idea said it is in the process of filing a review petition.

Analysts expect Vodafone Idea to declare bankruptcy and leave Indian market for good.