The top executive of Vodafone said 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 euro group loss in its first half.
Chief executive officer Nick Read told Reuters that
India, where Vodafone formed a joint venture with Idea Cellular in 2018, had been "a very challenging situation for a long time", but Vodafone Idea still had 300 million customers, equating to a 30 percent share of the sizable market.
"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 on Tuesday.
Also Read: Vodafone Idea is on the verge of a crisis: What went wrong with the telecom major?
Vodafone had asked the government for a relief package comprising a two-year moratorium on spectrum payments, lower licence fees and taxes and the waiving of interest and penalties on the Supreme Court case, which centred on regulatory fees.
Asked if it made sense for Vodafone to remain in
India 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 country's telecom department for $13 billion in overdue levies and interest last month, hitting the shares of both Vodafone Idea and rival Bharti Airtel. Long pending issues
Vodafone has clashed with
Indian authorities over tax and regulatory issues ever since it entered the country with a $11 billion deal to buy 67% of Hutchison Essar in 2007.
The arrival of new entrant
Reliance Jio Infocomm in 2016 added to Vodafone's problems as it faced competition from a nimble, innovative player. It responded by combining its operations with Idea Cellular, a deal that closed in 2018.
Read said Vodafone was not committing any more equity to
India and the country effectively contributed zero value to the company's share price. As a result of the ruling, it has written down the value of its stake in the joint venture to zero.
The company also owns a stake in
Indian tower operator Indus Towers, along with Bharti Airtel.
Vodafone's shares were up 1.7% at 163 pence at 1040 GMT as investors focused on an upgrade to its earnings forecast rather than
India. Upgraded forecast
The world's second-largest mobile operator reported improving organic revenue growth with signs of improvement in Spain and Italy and as it integrates a German cable acquisition.
It said organic service revenue rose 0.3 percent in the first half, as it returned to growth in the second quarter, while organic core earnings rose 1.4 percent.
It increased its forecast for adjusted core earnings to 14.8-15.0 billion euros from its previous forecast of 13.8-14.2 billion euros, but said
India and lower cash flows following the sale of assets in New Zealand meant free cash flow would be "around" 5.4 billion euros, rather than the "at least" 5.4 billion euros previously forecast.
India, Read said he was pleased with progress.
"This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa," he said.
Read cut Vodafone's dividend for the first time in May after tough market conditions and a need to invest in its networks and airwaves caused him to backtrack on his pledge not to reduce the payout.
Disclosure: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.