Vodafone's India business tottering after a $1.1 billion hit
13 November 2019
British telecom major Vodafone Group Plc may take a 1 billion euros ($1.1 billion) hit on the book value of its Indian venture following a Supreme Court order that favoured a government demand that it pay up thousands of crores in revenue share even as the company is reeling from spectrum payment demands and a ruthless price war.
The company would have to write down its 45 per cent stake in Vodafone Idea Ltd to around 600 million euros ($662 million) from 1.6 billion euros as of May this year, unless the government offers help.
The accelerating crisis at a business with 300 million subscribers - around two-thirds of Vodafone’s global customer base - is an extra burden on the parent company, which is already being squeezed in other markets by low-cost competitors and network-spending commitments.
Vodafone chief executive Nick Read said the company will cut dividend and focus on Europe and Africa, where he sees the best chance of defending profits.
He’s pledged not to divert more group funds to the Indian business, whose shares have lost more than two-thirds of their value since May.
The parent company already took billions in writedowns on the business in the past three years. Vodafone Idea is reeling under $14 billion of net debt, and according to analysts, the worst-case scenario of its Indian operations going to zero is becoming increasingly probable.
Last month’s Supreme Court ruling that Vodafone Idea must pay around Rs28,800 crore ($4 billion) in past dues on airwave licenses, was perhaps the last nail.
With another Indian spectrum auction on the way and Vodafone Idea fighting for survival. Vodafone Idea may try instead to tap into the value of its local infrastructure assets to raise fresh funds, according to analysts.