October 25, 2019 / 5:29 PM / 18 days ago

Vodafone Idea to seek waiver after court ruling on overdue payments

NEW DELHI (Reuters) - Loss-making Indian mobile carrier Vodafone Idea said on Friday it will ask the central government for relief on payments of at least $4 billion after a court ruling required it to pay overdue levies and interest.

A hotel employee clears a table after Vodafone Group and Idea Cellular news conference in Mumbai, India March 20, 2017. REUTERS/Danish Siddiqui

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.

It also asked telecom companies to deposit the outstanding amount within three months, according to a copy of the order seen by Reuters.

Vodafone Idea and rival Bharti Airtel Ltd reported losses for 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 the sale of mobile phones, income from rent of property or the 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 its already stretched balance sheet, local brokerage ICICI Securities said.

The company, a combination of Britain’s Vodafone Group Plc and local Idea Cellular, made a consolidated net loss of 48.74 billion rupees ($687.68 million) in the quarter to June, and had gross debt of 1.2 trillion rupees.

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.

Reporting by Sankalp Phartiyal, editing by Deepa Babington and Susan Fenton

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