Vodafone said its future in India could be in limbo after it incurred a 1.9 billion euro group loss in its first half after the Supreme Court’s judgment over licence fees.
Chief Executive Nick Read said India had been “a very challenging situation for a long time”. However, Vodafone Idea still has 300 million customers which constitute a 30 per cent share of the sizable market.
“Financially there’s been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got the negative supreme court decision,” he said on Tuesday.
On October 24, the SC upheld the definition of Adjusted Gross Revenue (AGR) calculation as stipulated by the Department of Telecommunications (DoT). Airtel and Vodafone owe more than half the amount due. The apex court further held that not only the original charges but the principal interest and penalties on delayed payments would also be payable.
The Supreme Court also ordered telecom operators to pay up $4 billion worth dues for past frequency licenses. Vodafone owns 45 per cent of Vodafone Idea but has not yet pledged more money to the business even as the latter drowns in $14 billion debt.
Vodafone had requested the government for a relief package comprising a two-year moratorium on spectrum payments, lower licence fees and taxes and the waiving of interest and penalties on the Supreme Court case.
Asked if Vodafone could remain in India without any such relief package, Nick said, “It’s fair to say it’s a very critical situation.”
Vodafone has been in dispute with Indian authorities over tax and regulatory issues since it entered the Indian market with an $11 billion deal to buy 67 per cent of Hutchison Essar in 2007. The arrival of new entrant Reliance Jio Infocomm in 2016 later added to Vodafone’s problems with a brutal price war.
Vodafone then responded by combining its operations with Idea Cellular, a deal that closed in 2018. “Vodafone was not committing any more equity to India, and the country effectively contributed zero value to the company’s share price. As a result of the ruling, it has written down the value of its stake in the joint venture to zero,” Nick said.
Vodafone wants a two-year delay on spectrum payments and lower licence fees and taxes. It also demands spectrum payments by the court to be spread over ten years and a waiver on interest and penalties. Read, and Vodafone Chairman Gerard Kleisterlee met Indian government officials in September and set out the relief proposals, arguing that Vodafone was the largest foreign direct investor in the country.
Progress Except In India
The world’s second-largest mobile operator reported improving revenue growth with signs of improvement in Spain and Italy and as it integrates a German cable acquisition. It said organic service revenue rose 0.3 per cent in the first half, as it returned to growth in the second quarter, while core earnings rose 1.4 per cent.
Apart from India, Read said he was pleased with the progress. “This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa,” he said.
Also Read: SC Instructs Vodafone Idea, Airtel, Other Telcos To Pay Rs 92,000 Crore Dues To Government