Loss-making Indian mobile carrier Vodafone Idea will ask the federal government for relief on payments of at least $4 billion after a court ruling requiring it to pay overdue levies and interest, the company said on Friday.
India’s Supreme Court on Thursday upheld a demand by the country’s Department of Telecommunications (DoT) that wireless carriers pay nearly $13 in overdue levies and interest.
Vodafone Idea and rival Bharti Airtel Ltd posted losses in the quarter to June, hit by a price war that began after conglomerate Reliance Industries launched its Jio telecoms arm in 2016 with free voice and cut-price data services.
“The judgment has financial implications, which we are reviewing,” Vodafone Idea said in a statement. “We will engage with the DoT in order for it to consider granting relief, including a waiver of interest and penalties.”
Both Vodafone Idea and Bharti sparred for over a decade with the DoT over the definition of so-called adjusted gross revenue (AGR), a percentage of which they pay as usage charges for spectrum or airwaves and as licence fees.
The companies maintained that AGR should comprise only revenue accrued from core services and not other revenue such as income from sale of mobile phones, income from rent of property or sale of scrap.
The Supreme Court however upheld the DoT’s view that all revenue be included in AGR.
On Friday, shares in Vodafone Idea closed 5.6% lower, while Bharti gained 0.8% in a broader Mumbai market that ended flat.
Vodafone Idea will be the worst hit given their already stretched balance sheet, local brokerage ICICI Securities said.
The company, a combination of Britain’s Vodafone Group Plc and local Idea Cellular, posted consolidated net loss of 48.74 billion rupees ($687.68 million) in the quarter to June, and had a gross debt of 1.2 trillion rupees.
Rival Bharti Airtel, which owes over 216 billion rupees to the DoT, reported a net loss of 28.66 billion rupees at the end of the June quarter, while net debt was 1.17 trillion rupees.
Bharti could scrape through making the overdue payments, but Vodafone Idea “is estimated to require additional capital to fund even the current operations beyond the next 3-4 quarters,” local brokerage Motilal Oswal said.
The court ruling will have limited impact on Jio as it started operations in late 2016, compared with rivals whose outstanding dues, interest and penalties have been mounting for over 10 years.