Indian telcos Vodafone Idea and Airtel post $10.3 billion in combined quarterly losses

Manish Singh
Customers gather outside a multi-brand mobile phone store displaying signage for Bharti Airtel Ltd. and Vodafone Group Plc in the old Delhi area of New Delhi, India, on Wednesday, Sept. 18, 2013. The Federal Reserves decision to postpone its rollback of U.S. stimulus offered Asian policy makers extra time to address domestic economic fragilities as the region copes with diminished capital inflows. Photographer: Prashanth Vishwanathan/Bloomberg via Getty Images

It’s not a good day for two of the top three telecom operators in India. Vodafone Idea, India’s second-largest telecom operator by subscriber count, said its consolidated loss had widened to $7.14 billion in the quarter that ended in September in what is the largest-ever quarterly loss witnessed in the nation on Thursday.

The announcement followed a similar outcry from India's third-largest telecom operator. Bharti Airtel posted a consolidated net loss of 230.4 billion Indian rupees ($3.23 billion) after the telco took charge of a one-time $4.3 billion potential outstanding payment to the government related to a court dispute surrounding 14-year-old adjusted gross revenue.

Vodafone Idea said its $7.14 billion loss also provides for 256.8 billion Indian rupees ($3.6 billion) in outstanding payments surrounding the aforementioned court case.

In the filing, the Indian unit of British giant Vodafone Group and billionaire Kumar Mangalam’s Idea Cellular said it will file a review petition to India’s apex court to challenge the federal government’s decision.

In recent weeks, executives of U.K.-headquartered Vodafone, which owns 45% of Vodafone Idea, have said that the group’s telecom business in India could collapse if the government does not offer it any relief. The network's India unit is already saddled with $14 billion in debt.

Vodafone Idea posted a revenue of 108,440 million Indian rupees ($1.5 billion), down 3.8% since last year. The company’s net loss during the same period last year stood at $687 million. Bharti Airtel's revenue in the quarter stood at $2.93 billion.

Last month, the Indian Supreme Court ruled that Vodafone Idea and Bharti Airtel and several other operators, including some that are no longer operational, will have to pay to the government within 90 days a combined $13 billion in adjusted gross revenue as spectrum usage charges and license fees.

The Indian government and telecom operators are disputing how gross revenue should be calculated. The government has mandated that license and spectrum fee to be paid by operators as a share of their revenue. Telcos have argued that only core income accrued from use of spectrum should be considered for calculation of adjusted gross revenue.

Bharti Airtel has also requested the government for a waiver. Through a spokesperson, Gopal Vittal, MD and CEO of Bharti Airtel’s India and South Asia business, said, “We continue to engage with the government and are evaluating various options available to us. We are hopeful that the government will take a considerate view in this matter given the fragile state of the industry.”

Mukesh Ambani, Asia’s richest man who runs telecom network Reliance Jio -- which has become the largest operator by subscriber count by starting a price war in the country three and a half years ago -- has said that he does not share the view of his rival networks. His telecom network owes the least to the government -- $1.8 million.

Reliance Communications, run by Mukesh's brother Anil Ambani, and Aircel, run by tycoon T. Ananda Krishnan, also owe the government money. They have been bankrupt for years.

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