Talking tough: Vodafone says future in India could be in doubt without govt relief

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Mumbai | Published: November 13, 2019 6:09:47 AM

Says either it takes its boots off the industry’s neck and allows it to compete, or firm is destined for a potentially chaotic final act.

“Financially there’s been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got the negative supreme court decision,” Vodafone Plc chief executive Nick Read said

Vodafone Plc has reportedly served a hard-hitting warning to the government to either let it fight competition in a fair manner in the market or the country’s standing in the international market would take a huge beating.

“Either they take their boots off the neck of the industry and allow it to better compete with Ambani on 5G, or Vodafone Idea is destined for a potentially chaotic final act with potential repercussions for India’s international standing,” chief executive Nick Read has been quoted telling the authorities by the UK’s Sunday Telegraph in a piece penned by its business editor, Christopher Williams.

Read was also reported as having stated that the group will not provide any more capital in India.

The piece appeared in the edition dated November 10, two days ahead of Vodafone Plc announcing its six-monthly earnings.

“It is tough to justify the risks where powerful billionaires enjoy such good luck,” the newspaper quoted Read having said.

The paper commented that “it would be a potentially disastrous but fitting end to Vodafone’s big bet on India. It entered the market in 2007 via a multi billion-pound acquisition. Since then it has pumped in billions more, always hoping that the sheer scale of India would one day deliver returns to match. Throughout, however, Indian officialdom welcomed Vodafone with all the warmth of a Himalayan mountaintop. It has been in court since the moment it arrived and used as a soft target by politicians and taxmen. The destruction of value has been complete”.

Vodafone Plc, which announced its global six-monthly earnings, ended September, on Tuesday, did not talk about Read serving any such ultimatum but the CEO did say that the company was not providing any more equity to India.

The company also said that its future in India could be in doubt unless the government stopped hitting operators with higher taxes and charges, after a court judgment over licence fees resulted in a €1.9-billion group loss in its first half.

Read said India, where Vodafone formed a joint venture with Idea Cellular in 2018, had been “a very challenging situation for a long time”, but it remained a sizable market where Vodafone had a 30% share.

“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.

He said that Vodafone had asked the government for a relief package comprising a two-year moratorium on spectrum payments, lower licence fee and taxes and waiving of interest and penalties on the Supreme Court case.

Asked if it made sense for Vodafone to remain in India without any relief package, he said: “It’s fair to say it’s a very critical situation”.

Stating that Vodafone was not committing any more equity to India, Read said that the country effectively contributed zero value to the company’s share price.

As is known, Vodafone Idea, which has been posting a quarterly loss of around Rs 5,000 crore for the past few quarters, was hit last month, along with other incumbent operators with a massive licence fee and spectrum usage charge of more than Rs 40,000 crore. This was after the Supreme Court ruled that telecom operators would have to pay their licence fee and spectrum usage charge based on their gross revenue which would include even revenues from non-telecom licence business. The total industry due as a result of it went as high as Rs 1.33 lakh crore. The Supreme Court has given the companies three months time to pay the dues, however, the government has set up a secretaries panel to see what kind of relief package can be drawn up by the government for the financially stressed telecom operators.

While the government is looking at some cut in the licence fee, spectrum usage charge and a two year moratorium on payment of deferred spectrum installment, sources have indicated that some kind of relief — payment in installments stretched over 20 years — on the payment of licence dues can also be offered.

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