Vodafone CEO Nick Read has warned that it’s business in the Indian telecom market may move into a “liquidation scenario” if the remedies the industry has suggested are not taken up.
Speaking at the announcements of its half year results the Vodafone CEO outlined the position of the telecom giant in the county, adding that there is “zero value” in its share price for India. In the H1 2020 financial announcement, Vodafone said that losses of just shy of €2 billion (£1.7bn) were primarily down to a supreme court order to the industry to pay dues in excess of Rs 1.3 lakh crore ($13bn).
Vodafone, amongst other Indian telecom providers, have met with the Indian government following the supreme court verdict that broadened the definition of annual gross revenue (ARG) to include non-core items such as licence fees and spectrum usage charges.
Read said “I think that the government has now acknowledged the criticality of the situation in India, as a result of the AGR case the Supreme Court decision, including, I would say the financial stress on the sector prior to the case.
"When I met with them a month ago we had discussions extensively with many areas of the government. They were clear that they are not looking for a monopoly situation.
"They want a vibrant telecom sector and therefore, they formed the committee of secretaries to look at what a remedy package would look like. I think they're showing urgency and they've listened to the three aspects of what we're asking for.”
The Vodafone CEO stressed that discussions with the Indian government were with the industry, rather than exclusively between Vodafone and the Indian authorities.
According to Read, remedies that the industry is suggesting revolve around a new payment structure on spectrum auctions, lower licence fees and a waiver of interest and penalties as a result of the recent AGR case.
“Firstly, we're asking for a two year moratorium on spectrum payments to allow us to harmonise the payments over the 20 years, that will give us breathing space in terms of cash out on that business.
"The second one is lower licence fees and taxes that are born by the sector, they've just increased and increased and increased and we've got to an unsustainable position. And the third thing is regarding the AGR case, waiver of interest and penalties and interest on penalties and spread the principle over a 10 year period.”
Read added that Vodafone is a large player in the Indian market and described the situation as “critical” if the remedies suggested are not met.
“When the decision came out it was $13 billion for the industry, that number will go up when it's finalised.
“That meant $4 billion was Vodafone idea joint venture and of that $4 billion, only $900 million was actually the principal, the rest was interest in penalties so staggering amounts.
“So what we're saying to the government is, we have 300 million customers that rely on our service. We substantially in this country. But we've reached a point where we cannot put any new equity from group into India.”