Vodafone sees no remaining value in Indian operation

Vodafone now values its investment in its troubled Indian operations at zero and warns that the outfit is in need of more cash from its lenders.

The revelation came on Tuesday in the telecoms group’s full-year results announcement, but funnily enough was overshadowed by the news of that much-needed turnaround plan and its 11,000 job cuts in Europe. As the dust settles on that, we’re able to take a closer look at Vodafone’s various operations, including that problematic Indian provider Vodafone Idea, or Vi.

Put simply, Vodafone seems to be backing away from Vi. The business needs more money, that Vodafone is certainly not willing to provide, and that zero valuation indicates that it will put no more effort into saving it.

“VIL [Vodafone Idea Ltd] remains in need of additional liquidity support from its lenders and intends to raise additional funding. There are significant uncertainties in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism and no further cash payments are considered probable from the Group as at 31 March 2023,” Vodafone said, in the notes to its consolidated financial statements for the 2023 financial year.

The mechanism it refers to is that which formed part of the 2017 merger agreement that brought together Vodafone’s Indian mobile operation with Aditya Birla Group-owned Idea Cellular. Essentially, it’s a financial mechanism that covers payments between Vodafone Group and Vi. Vodafone notes that its potential exposure under that mechanism is capped at 64 billion rupees (€719 million), but, as the above statement indicates, Vi can’t pay its dues, and Vodafone won’t shell out any more.

“The carrying value of the Group’s investment in VIL is €nil and the Group is recording no further share of losses in respect of VIL. The Group’s potential exposure to liabilities within VIL is capped by the mechanism described above; consequently, contingent liabilities arising from litigation in India concerning operations of Vodafone India are not reported,” Vodafone said.

Despite some significant efforts to save it, Vi remains in some trouble.

The Indian government became Vi’s single biggest shareholder earlier this year as part of what was essentially a financial bailout package. The state converted INR161.3 billion ($1.95 billion) worth of interest Vi owed on spectrum and other licence fees into equity, giving it a 33% stake in the telco. The plan was agreed as long ago as 2021, but delays ensued as the government sought to pressure Vodafone and Aditya Birla to plough more money into Vi, and therefore took until February this year to draw to a close.

It appeared then – just a few months ago – that Vi’s founder shareholders would continue to back the beleaguered telco. Now, that seems less likely.

Vi is still shedding customers. In February it lost more than 2 million customers, according to the latest data from the Telecom Regulatory Authority of India (TRAI), giving it a base of just under 238 million and a market share of 21%. Leader Reliance Jio serves 37% of the market and Bharti Airtel 32%, and – crucially – both players are working hard to expand 5G services, while Vi has yet to announce any firm plans even to launch the technology.

The future looks pretty bleak for Vi.

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