Vodafone blames the country's bureaucracy for its India woes
Vodafone has slammed inclusion of its name in an official document on black money and exhorted India's political leaders to intervene, in uncharacteristically blunt comments that appear to blame the country's bureaucracy for much of its recent travails.
Vittorio Colao, chief executive of the UK-based mobile giant, said on Tuesday that "equating Vodafone with black money is ridiculous", responding to the finance ministry's White Paper on Black Money that cited his company's transaction with Hutchison as an example of misusing corporate structure to avoid paying taxes.
"We bought a company in India, we invested in India, we have made no capital gains in India and we have won a Supreme Court case in India. I don't see anything black in this," he said. Colao, who broke his silence on the issue, was more scathing in his comments on the country's bureaucracy.
"We have had problems with the environment, with the regulators, and at some level with some bureaucrats. It is time that Indian political leaders look these bureaucrats in the eye, and ask whether this is what they want for the country," Colao said as he indicated Vodafone's willingness to "conciliate if it's a reasonable, sensible conciliation" while protecting the rights of its shareholders.
"As for being between a rock and a hard place, we are pretty hard rock ourselves," Colao said. "The policy environment in India has to improve for India's sake," he added. Colao, who was unveiling results for the 12 months to March 31, 2012, said certain steps had to be taken before Vodafone could initiate international arbitration.
India IPO Unlikely This Year
The retrospective tax law has to be passed; the Income-Tax Department has to raise a demand, after which the company can initiate international arbitration if it so chooses. Media reports have suggested that the I-T Department will raise a demand once the president gives her assent to the Finance Bill.
Speaking about a Vodafone India IPO, Nick Read, Vodafone's head of emerging markets, said a listing did not seem appropriate given the situation facing the company and the uncertainty in the regulatory framework.
"It is not the right time to be talking about an IPO. But if you ask us, we want to do an IPO in India. We want to be part of the development of the country. We think that will be good for us, and for the country. However, we need tax and regulatory conditions to be clearer."
Vodafone's India unit Chief Executive Martin Pieters, speaking in Mumbai, was more emphatic saying the company may not go ahead with its proposed public offer this year if the government accepts sector regulator Trai's proposal to auction airwaves at 13 times of 2008 price. "It is highly unlikely that we are able to do an IPO in the middle of so many spectrum auctions. It depends on what the final decision on auction of spectrum will be," Pieters told reporters.
Asked about the possibility of having to pay for spectrum in an upcoming auction, Read again clarified that Vodafone's stance was that of the industry - that the base price set was too high, and it would artificially constraint telecom companies, forcing them to raise prices. "It will be a tax on the consumer, and we would struggle to develop a business case in some circles at these prices." He clarified that Vodafone had enough spectrum to service its current businesses.
Colao reiterated that exiting India was not an option. "We have never had the slightest problem with the Indian market. We are liked, we are an admired brand, and everything we have done from the customer side has been a positive experience. As for our patience, we have the patience of a multinational. Vodafone will be in India many, many years from now. We also have a lot of resilience - as a company, and my personal resilience.
In the results released on Tuesday, Vodafone Group Plc announced it was writing down £4 billion on its operations in Greece, Spain, Portugal and Italy because of the euro-zone crisis. The group's turnover rose 1.5% to £46.4 billion, with pre-tax profits of £9.55 billion.
Bucking the global trend, Vodafone's India arm recorded a 389% jump in operating profit to £60 million (Rs 524 crore) for the 12-month ended March 2012, from £15 million (Rs 131 crore) during the corresponding period in the previous year. The telco also recorded an operating-free cash flow of £531 million (Rs 4,539 crore) for the 12 months ended March '12 as against £433 million (Rs 3,783 crore) for the year ended March '11.
This marks only the second instance of Vodafone's India arm recording profit from operations. Vodafone also recorded strong operational performance in India and said its revenues jumped 19.5% to Rs 32,184 crore in FY12 compared with the previous year while EBIDTA, a key measure of profitability, was up 21.6% to Rs 8,549 crore.
- Economic Times