Vodafone Idea and Bharti Airtel Records Biggest Loss in India's Corporate History

Industry Outlook | Monday, 25 November 2019

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The Telecom Industry in India is going through its most turbulent times, as companies are reeling from bruising competition. The precarious Telecom Industry in India had come under intense focus last week when Indian mobile career Vodafone on Thursday reported the biggest loss in India’s corporate history after making provisions for outstanding government dews.

Vodafone Idea reported a consolidated net loss of approximately 500 billion rupees in the second quarter of the year to September. A charge of 256.78 billion rupees was charged on the company by the government of India with a combined total of 920 billion rupees of overdue to be paid by other wireless careers.

The bulk of the 920 billion amounts are to be paid by Vodafone Idea and Bharti Airtel alone. Bharti Airtel, on the other hand, Thursday reported a consolidated net loss of 250.45 billion rupees.

Telecommunication companies in India pay the Department of Telecommunications (DoT) nearly 3-5 percent of their Adjusted Gross Revenue (AGR) and 8 percent as license fees. The DoT and the mobile providers of India have been fighting over the definition of AGR. The companies argue that AGR should only comprise of revenue generated from core services however, the Indian government claims AGR should include all revenue sources. The issue was taken to the Supreme Court of India, who sided with the Department of Telecommunications' view of AGR.

Vodafone Idea is said to be on the process of filling a review petition to the Supreme Court of India. The company’s gross debt stood at 1.17 trillion rupees. India has the world’s cheapest mobile data prices; India’s commercial mobile data prices are not financially viable enough. Hence, mobile data providers such as Reliance Jio, Bharti Airtel and Vodafone are set to increase data prices by 20-30 percent. The prices increased will be the first hike in three years. Until recent times, India was the best place in the world to own a Smartphone, not anymore.