New Delhi, Nov 12 (IANS) The price wars in the Indian telecom market have pushed the value of Vodafone’s local joint venture to zero or nil as Vodafone CEO Nick Read indicated that the Indian operation is headed for liquidation unless the Indian government provides relief on mobile spectrum fees.
The parent company, Vodafone, has written off the book value of the Indian business. As per financial results released by Vodafone Group on Tuesday, the book value of Vodafone’s 45 per cent stake in joint venture, Vodafone Idea, has slumped to zero in November 2019. Contrast this with the fact that the book value was more than 2 billion euros in June 2018, but in May of this year, the book value had been reduced to 1.5 billion euros.
In the financial results released on Tuesday, most of Vodafone’s bad news came from India. This included write-downs, losses, reduced cash flows and provisions for the Supreme Court judgement.
Vodafone said the remaining carrying value has been redued to nil. “As the Group has no obligation to fund VIL losses, the Group has recognised its share of estimated Vodafone Idea Limited (‘VIL’) losses arising from both its operating activities and those in relation to the AGR judgement to an amount that is limited to the remaining carrying value of VIL, which is therefore reduced to nil,” Vodafone said. It has recognized the losses and the carrying value is reduced to nil.
“If the carrying value had been high enough not to have restricted the Group’s share of losses, then the recognised share of losses would have been substantially higher,” it said.
“The Group’s recorded share of VIL’s resulting losses has been restricted to the amount that reduces the Group’s carrying value in VIL to nil at 30 September 2019. The Group’s carrying value was 1,392 million euros at 31 March 2019 and in May 2019 the Group invested 1,410 million euros via a rights issue,” it said.
As per media reports, Read said in London after the financial results that Vodafone Group Plc’s Indian venture could be headed for liquidation unless the government gives relief. One of the largest foreign investors in India, Vodafone has decided not to invest any more into the business.
“If you don’t get the remedies being suggested, the situation is critical,” Read said at a press round-table in London, the reports said. “If you’re not a going concern, you’re moving into a liquidation scenario — can’t get any clearer than that.”
Vodafone wrote off the carrying value of its share in the loss-making joint venture in the half-year results after analysts indicated further impairments.