Left Menu
Development News Edition

Vodafone says future in India could be in doubt without govt relief


Vodafone says future in India could be in doubt without govt relief

British telecom giant Vodafone on Tuesday said its future in India could be in doubt if it is forced to pay thousands of crores in statutory dues following the Supreme Court ruling. Having made no provision for dues that have been locked up in legal dispute for more than a decade, Vodafone chief executive Nick Read said the government needs to ease off on payment demands to ensure a future for group's India joint venture, Vodafone-Idea Ltd.

"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 a call with reporters after first-half results. India, he said, had been "a very challenging situation for a long time".

"It's a very critical situation," he said when asked if it made sense for Vodafone to remain in India without any relief package. "The government has stated its desire not to end up with a monopoly." Vodafone's operating loss from India business jumped to 692 million euros in April-September from 133 million euros in the same period last year.

Vodafone wrote off the carrying value of its share in the loss-making joint venture. It said the 1.9 billion euros in the loss for the group during six months ended September 30 "primarily reflects losses in relation to Vodafone-Idea post an adverse judgement against the industry by the Supreme Court of India."

In the earnings statement, the group made no further commitment to equity in India business, which it said contributed zero value. It saw free cash flow of around 5.4 billion euros versus previous guidance of at least 5.4 billion. "In October, the Supreme Court in India ruled against the industry in a dispute over the calculation of licence and other regulatory fees, and Vodafone Idea is now liable for very substantial demands made by the Department of Telecommunications in relation to these fees," the company said in its earnings statement. "We are actively engaging with the government to seek financial relief for Vodafone Idea."

The liability in telecom licence fee and spectrum usage charge together with penalty and interest for late payment may run into Rs 1.4 lakh crore for the industry. Vodafone-Idea may have to pay a third of it. Vodafone said it has "no obligation" to fund Vodafone Idea Ltd losses and so it has "has recognised its share of estimated Vodafone Idea Ltd (VIL) losses arising from both its operating activities and those in relation to the (Supreme Court) judgement to an amount that is limited to the remaining carrying value of VIL, which is therefore reduced to nil."

The group's carrying value was 1,392 million euros at March 31, 2019, and in May 2019, the group invested 1,410 million euros via a rights issue. "Significant uncertainties exist in relation to VIL's ability to generate the cash flow that it needs to settle or refinance its liabilities and guarantees as they fall due, including those relating to the (Supreme Court) judgement. VIL is seeking relief from the Indian government, including, but not limited to, granting a waiver of interest and penalties relating to the judgement," the statement said.

It said as part of the agreement to merge Vodafone India and Idea Cellular, the parties agreed a mechanism for payments between Vodafone Group and VIL pursuant to the crystallisation of certain identified contingent liabilities in relation to legal, regulatory, tax and other matters, including the Adjusted Gross Revenue (AGR) dispute before the Supreme Court, and refunds relating to Vodafone India and Idea Cellular. "Any future payments by the Group to VIL as a result of this agreement would only be made after satisfaction of contractual conditions. Having considered the possible future developments for VIL, the Group has concluded that there are significant uncertainties in relation to VIL's ability to settle the liabilities relating to the AGR judgement and has not assessed a cash outflow under the agreement to be probable at this time," it said.

The group's potential exposure under this mechanism is capped at Rs 8,400 crore (1.1 billion euro). The Department of Telecommunications (DoT) has been in dispute with telecom service providers for over a decade concerning the correct interpretation of licence provisions for fees based on AGR, a concept that is used in the calculation of licence and other fees payable by telecom service providers.

On an appeal to the Supreme Court from a decision of the Telecommunications Dispute Settlement Appellate Tribunal (TDSAT) substantially upholding the telecom service providers' interpretation of AGR, the Supreme Court on October 24 held against the telecom service providers, including VIL. The Supreme Court's ruling in favour of the DoT renders the telecom service providers, including VIL, liable for principal, interest, penalties and interest on penalties within three months.

"Application may be made to seek review of the Supreme Court's decision," the statement said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


TRENDING

OPINION/BLOG/INTERVIEW

Sentiment Analysis of Twitter users during COP 25: Governments losing trust on Climate Action

Sentiment analysis of Twitter users during COP25 in Madrid, being held from December 2-13, shows widespread fear on climate change due to global warming but almost no trust on governments in meeting the emission targets. In the analysis the...

These innovators are making humanitarian response more efficient

These alarming trends prompt a call for the world to not only address the ongoing crisis but also to adopt innovative approaches to fulfill the growing humanitarian needs in such emergencies. ...

Hyderabad Encounter: A sentiment analysis of public mood on day of encounter

Sentiment analysis of twitter users revealed that they showered salutes on Hyderabad police for eliminating alleged gang rapists of the veterinary doctor but only a few believe in cops version of successive events leading to encounter....

Hyderabad Encounter: Time to review modern judiciary and restore people’s confidence

Its probably for the first time in the history of independent India, the parliamentarians, chief ministers and ministers in the Union and State governments are openly supporting an encounter. This indicates the people from top to bottom hav...

Videos

Latest News

Rahul doesn't have moral right to remain member: Rajnath in LS on 'rape in India' remark

The Lok Sabha witnessed its second adjournment on Friday after BJP members led by Defence Minister Rajnath Singh sought apology from Congress leader Rahul Gandhi over his remarks that Make in India programme was being converted into Rape in...

In a first, Irish nationalists overtake unionists at UK election

Northern Ireland elected more Irish nationalists to Britains parliament than pro-British unionists for the first time on Friday, after the largest nationalist party Sinn Fein narrowly won the final of the regions 18 seats.That meant Sinn Fe...

Britain's post-Brexit phase will start Feb. 1 - EU Commissioner Breton

Britains post-Brexit phase will start on Feb. 1 as there is now little doubt its parliament will accept Prime Minister Boris Johnsons deal on withdrawing from the European Union, European Commissioner for internal markets Thierry Breton sai...

Trump congratulates UK's Boris Johnson on 'great' election win

Washington, Dec 13 AFP US President Donald Trump on Friday congratulated UK Prime Minister Boris Johnson on his election victory, saying their two countries were now free to strike a massive new trade deal. Prime Minister Boris Johnson look...

Give Feedback