Huge Losses by Vodafone Idea, Airtel May Further Cripple Banks

New Delhi: Underlining the looming crisis in the country’s telecom sector, two private telecom service providers have posted a whopping combined loss of Rs 73,966 crore in the September quarter of this financial year, attributing it to the recent Supreme Court order on spectrum and license fees dues.

As the telecom sector reels under a debt of over Rs 4 lakh crore, the government has formed a Committee of Secretaries to examine the financial stress and recommend mitigating measures. Concerns over stress in the sector are posing a huge threat to Indian banks, which will bear the maximum brunt if these companies go bankrupt.

According to estimates, State Bank of India is said to have an exposure of Rs 37,330 crore to Vodafone Idea and Airtel. Similarly, HDFC Bank (Rs 24,515 crore), Axis Bank (17,315 crore), Bank of Baroda (Rs 11,471 crore) and Punjab National Bank (Rs 7,318 crore).

On Thursday, Vodafone Idea posted a loss of Rs 50,921 crore, the highest-ever quarterly loss by any corporate in India and Airtel reported a loss of Rs 23,045 crore. These staggering losses are due to provisioning by these companies towards the ‘Adjusted Gross Revenue’ (AGR) dues.

Ruling on the longstanding litigation over AGR, the Supreme Court on October 24, upheld the Department of Telecom’s (DoT) interpretation of AGR and 15 telecom operators were asked to pay Rs 1.4 lakh crore to the government.

While the telecom companies demanded that the government include only revenue from telecom services under AGR, the apex court backed the Department of Telecommunication’s (DoT) stand, according to which AGR must be calculated by including all revenue earned by an operator, including from non-core telecom operations.

While posting the financial results, Vodafone Idea said it had “accounted for the estimated liability of Rs 27,610 crore related to license fee and Rs 16,540 crore related to Spectrum Usage Charges up to September 30, 2019, including penalty and interest of Rs 33, 010 crore.” Similarly, Bharti Airtel provisioned Rs 28,450 crore for AGR dues in the second quarter.

Total AGR dues of Bharti Airtel are estimated to be about Rs 42,000 crore, for Vodafone Idea, the amount is around Rs 40,000 crore, while that of the state-run entities, BSNL and MTNL, together owe nearly Rs 5,000 crore as dues while Mukesh Ambani’s Jio, which entered the market in 2016, owes Rs 14 crore.

It is to be noted that of the 15 operators, only five are functional, while the remaining companies are either closed or are under insolvency. These include Reliance Communications, Telenor, Tata Teleservices, Aircel and Videocon. This implies that the AGR dues cannot be completely recovered and both Vodafone Idea and Bharti Airtel, through the Cellular Operators Association of India (COAI), are seeking relief from the government.