Humongous loss came despite 41.5% increase in revenue

Vodafone Idea, India’s second largest telco by number of subscribers, reported a record net loss of ₹50,922 crore, the largest in Indian corporate history, due to a one-time provision of ₹30,774.5 crore made post the Supreme Court’s ruling.

“Consequent to the recent judgment by the Supreme Court, we have accounted for the estimated liability of ₹27,610 crore related to license fee and ₹16,540 crore related to spectrum usage charges up to September 30, 2019 including the interest, penalty and interest thereon of ₹33,010 crore,” Vodafone Idea said in a statement.

This estimate was based on demands received from DoT till date, an estimation for the period for which demands had not been raised, together with interest and penalty adjusting for certain computation corrections, it added.

The loss was reported in spite of a 41.5% increase in revenue to ₹10,844 crore during the quarter. Company’s EBITDA during the quarter stood at ₹3,347 crore.

“Whilst the Company has provided for SUC, considering that no spectrum is used for generating non-telecom income, the Company is evaluating the levy of SUC on such income. Accordingly, during the quarter we recognised a charge of ₹25,680 crore as a part of exceptional item after adjusting the available provision and potential payments, on satisfaction of contractual conditions, under amechanism with Vodafone Group,” the statement added.

Ravinder Takkar, MD & CEO, said “We are in active discussions with the government seeking financial relief following the recent Hon’ble Supreme Court ruling.”

Vodafone Idea’s subscriber base declined to 311.1 million from 320 million in the first quarter.

The company reduced its capital expenditure to ₹13,000 crore from ₹17,000 crore for FY20 on account of savings resulting from better pricing, disaggregation of components while ordering and reduction in planned 4G footprint in non-priority areas.

“We remain highly focused on rapid network integration and 4G coverage and capacity expansion in our key markets. Data experience for our customers has significantly improved post consolidation and we now lead the league tables on 4G data download speeds in the circles of Delhi, Madhya Pradesh, West Bengal as well as in Sikkim and Chennai. We believe this is leading to improved customer perception and consequently better 4G traction for us, as we have started to witness improved 4G subscriber additions. We remain well on track to deliver our synergy targets by Q1FY21,” Mr. Takkar added.

Company’s gross debt as of September 30, 2019 stood at ₹1,17,300 crore, including ₹89,170 crore deferred spectrum payment obligations due to the government, but excluding lease liabilities.

Company’s net debt during the quarter stood at ₹1,01,910 crore during the quarter compared to ₹99,260 crore in Q1FY20 as Vodafone Idea had cash and cash equivalents ₹15,390 crore.

Casting doubt over company’s ability as a going concern, Vodafone Idea’s auditor, in its audit review over the SC judgment said, “Its ability to generate the cash flow that it needs to settle, or refinance its liabilities and guarantees as they fall due resulting in material uncertainty that casts a significant doubt on the holding company’s ability to make the payments mentioned therein and continue as a going concern.”

“The said assumption of going concern is dependent upon the holding company obtaining the reliefs from the government, positive outcome of the proposed legal remedy. Our conclusion is not modified in respect of this matter,” the auditor S R Batliboi and Associates, said.

Vodafone Idea shares on the BSE declined 20.27% to close at ₹2.95 in a firm Mumbai market on Thursday before touching its 52-week low of ₹2.90, valuing the company at ₹8,477 crore.

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