Vodafone Idea posted a massive net loss of Rs 50,921 crore on Thursday, in the quarter ending September 30. This was on account of the Supreme Court judgement on the Adjusted Gross Revenue (AGR) matter. According to reports, it is the biggest ever quarterly loss in India’s corporate history.
As per a regulatory filing by the company, Rs 30,774.5 crore was a one-time loss the company incurred due to the recent Supreme Court verdict. “We have accounted for the estimated liability of Rs 27,610 crore related to licence fee and Rs 16,540 crore billion related to spectrum usage charges up to September 30, 2019, including the penalty and interest thereon of Rs 33,010 crore," the regulatory filing said.
The company, which incurred a loss of Rs 4,873 crore in Q1 of the current fiscal, said that it is in the process of filing a review petition of the AGR judgment in the Supreme Court. Furthermore, it added that the Supreme Court order on AGR has resulted in liabilities on account of licence fee and spectrum charges to the tune of Rs 44,150 crore, which have to be paid within three months.
This estimate is based on demands received from the Department of Telecommunications (DoT) till date, an estimation for the period for which demands have not been raised, together with interest and penalty adjusting for certain computation corrections.
Vodafone Idea's Q2 revenue stood at Rs 10,844 crore, a fall of 3.9% quarter-on-quarter. Its EBITDA was at Rs 3,347 crore, a huge drop of 9.1%, while its margin dropped to 30.9%.
The company said that there was significant doubt over its ability to generate cash flow to settle and refinance liabilities and guarantees, dependent on obtaining relief from the government.
Vodafone’s results came on the day that one of its main competitors in India, Airtel, posted a loss of Rs 23,044.9 crore for Q2.
Shares of Vodafone Idea crashed by 21% on Thursday after the Department of Telecommunications (DoT) sent notices to telecom companies asking them to pay the AGR dues on a self-assessment basis within the next three months. Airtel and Vodafone Idea, the worst-hit companies, have to self-assess the dues for the last 14 years and submit the amount by January 24, 2020.
Airtel's dues are roughly Rs 21,680 crore, while Vodafone Idea will need to cough up at least Rs 28,300 crore. Jio's dues are just Rs 13 crore since it is a late entrant in this field.
The problem started when telecom operators migrated to a new system offered by the government in 1999 under which they agreed to share a certain percentage of revenue with the government. Operators argued that AGR should comprise only revenue from telecom services, but the DoT insisted that it should include all revenue earned by an operator.
Putting an end to a 14-year-old legal battle, the SC said that telecom operators have to shell out a whopping Rs 92,000 crore in total in past dues at a time when they are already grappling with tough competition, debt pressure and shrinking revenues.
A day prior to the results, Vodafone CEO Nick Read indicated that the company’s Indian operations may be headed for liquidation unless the Indian government provides relief on mobile spectrum fees and cited “unsupportive regulation” and “excessive taxes” as reasons. He stated, “It’s a very critical situation.”
These factors indicate that material uncertainty exists, casting significant doubts on the company's ability to continue and its ability to generate the cash flow that it needs to settle, or refinance its liabilities and guarantees, Vodafone Idea said.
"The company's ability to continue is dependent on obtaining relief from the government and positive outcome of the proposed legal remedy," the telco said.
In a statement, Vodafone Idea said that it has made representations through the Cellular Operators Association of India (COAI) to the government to provide relief to the telecom sector.
“It is to be noted that our ability to continue as going concern is dependent on obtaining the reliefs from the government,” the company said in a statement.
With IANS inputs