Vodafone's future in India could be in doubt without the govt support

Vodafone on Tuesday said its future in India could be in doubt following recent Supreme Court ruling on AGR. According to Vodafone, company's future could be in darkness if forced to pay thousands of crores in statutory dues. 

Vodafone's operating loss from India business rose to 692 million euros in April-September from 133 million euros in same period last year. Vodafone wrote off carrying value of its share in loss-making joint venture, Vodafone-India Ltd. company said 1.9 billion euros in loss for group during six months ended September 30 "primarily reflects losses in relation to Vodafone-Idea post an verse judgement against industry by Supreme Court of India."

Vodafone chief executive Nick Re said government needs to ease off on payment demands to ensure a future for Vodafone-Idea Ltd. "Financially re's been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got negative Supreme Court decision," he said on a call with reporters after first-half results. He ded India h been "a very challenging situation for a long time".

Vodafone's future in India in darkness?

"It's a very critical situation," he said when asked if it me sense for Vodafone to remain in India without any relief pack. " government has stated its desire t to end up with a mopoly."

In earnings statement, Vodafone-Idea Ltd. me furr commitment to equity in India business, which it said contributed zero value. group saw free cash flow of around 5.4 billion euros versus previous guidance of at least 5.4 billion.

"In October, Supreme Court in India ruled against industry in a dispute over calculation of licence and or regulatory fees, and Vodafone Idea is w liable for very substantial demands me by Department of Telecommunications in relation to se fees," company said in its earnings statement. "We are actively engaging with government to seek financial relief for Vodafone Idea."

Along with penalty and interest for late payment, total liability for telecom industry may run into Rs 1.4 lakh crore. Vodafone-Idea may have to pay a third of it.

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Vodafone said it has " 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 (Supreme Court) judgement to an amount that is limited to remaining carrying value of VIL, which is refore reduced to nil." group's carrying value was 1,392 million euros at March 31, 2019, and in May 2019, group invested 1,410 million euros via a rights issue.

"Significant uncertainties exist in relation to VIL's ability to generate cash flow that it needs to settle or refinance its liabilities and guarantees as y fall due, including those relating to (Supreme Court) judgement. VIL is seeking relief from Indian government, including, but t limited to, granting a waiver of interest and penalties relating to judgement," statement said.

It said as part of agreement to merge Vodafone India and Idea Cellular, parties agreed a mechanism for payments between Vodafone Group and VIL pursuant to crystallisation of certain identified contingent liabilities in relation to legal, regulatory, tax and or matters, including justed Gross Revenue (AGR) dispute before Supreme Court, and refunds relating to Vodafone India and Idea Cellular.

"Any future payments by Group to VIL as a result of this agreement would only be me after satisfaction of contractual conditions. Having considered possible future developments for VIL, Group has concluded that re are significant uncertainties in relation to VIL's ability to settle liabilities relating to AGR judgement and has t assessed a cash outflow under agreement to be probable at this time," it said.

This way, Vodafone-Idea Ltd. group's potential exposure is capped at Rs 8,400 crore.

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(With PTI inputs)