Vodafone has said that its future in India remains in doubt due to high taxes imposed by the government. The company is reportedly exploring option to exit the Indian market altogether. It detailed plans to exit the market after a court judgement over license fees resulted in a €1.9 billion group loss in its first half. Nick Read, Chief Executive of Vodafone, said the country has been challenging despite a joint merger with Idea Cellular last year. The company was the market leader after joint venture but lost the position to Reliance Jio in recent quarter.
Despite the decline in revenue, Vodafone Idea Ltd has 300 million customers and a market share of 30 percent. “Financially there’s been a heavy burden through unsupportive regulation, excessive taxes and on top of that we got the negative supreme court decision,” Read said on Tuesday. The company has now asked the government for a relief package comprising a two-year moratorium on spectrum payments. It has also asked for lower license fees, taxes and waiver of interest and penalties on the Supreme Court case on regulatory fees.
Without such a relief package, he said, “It’s fair to say it’s a very critical situation.” The Supreme Court upheld a demand from the telecom department for $13 billion in overdue levies and interest last month. The court ruling hit both Vodafone Idea and Bharti Airtel. Since its entry, Vodafone has clashed with Indian authorities over tax and regulatory issues, reports Reuters. The company commenced India operations with a $11 billion deal to buy 67 percent of Hutchison Essar in 2007.
Reliance Jio‘s entry in 2016 and the price war made the situation even more difficult for the company. It decided to merge its operations with Idea Cellular and the deal closed in 2018. However, the combined entity has lost customers and has failed to compete with Reliance Jio and Airtel. Read also said that Vodafone is not committing any more equity to Indian market. He further confirmed that Indian unit contributed zero value to the company’s share price. It has written down the value of its stake in the joint venture to zero.
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Vodafone also owns a stake in tower operator Indus Towers along with Bharti Airtel. While it struggles in India, the operator reported organic revenue growth in markets like Spain and Italy. According to Reuters, Vodafone’s shares were up 1.7 percent at 163 pence due to upgrade to its earnings forecast. The company adjusted its core earnings to €14.8-15 billion from previous forecast of €13.8-14.2 billion. But India remains a drag on its free cash flow.