Vodafone Group Values Its Vodafone Idea Investment At Zero

Vodafone Group Plc values its investment in Vodafone Idea Ltd. at nil, indicating that the U.K.-based telecom operator has no interest in salvaging its joint venture in India.

“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,” Vodafone Group Plc said in the notes to its FY23 preliminary results released on Tuesday. “The Group's potential exposure to liabilities within VIL is capped...consequently, contingent liabilities arising from litigation in India concerning operations of Vodafone India are not reported.”

According to the terms of the merger between Vodafone India and Idea Cellular in 2017, the companies agreed to a mechanism for payments between Vodafone Group and Vodafone Idea, relating to legal, regulatory and tax liabilities arising from the amalgamation. Any future payments by Vodafone Group Plc in favour of VIL would only be made after the satisfaction of certain contractual conditions.

This capped Vodafone Group Plc's potential exposure to the amalgam at Rs 6,400 crore, after Vodafone paid VIL a total of Rs 1,900 crore in the year ended March 31, 2021.

Still, there are concerns, and the group isn't paying for it.

“VIL remains in need of additional liquidity support from its lenders and intends to raise additional funding,” Vodafone Group Plc said in the filing. “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 March 31, 2023.”

A Rs 16,000-crore government lifeline to VIL hasn't helped either.

The government has converted into equity the interest accrued on Vodafone Idea's dues, making it the biggest shareholder in the debt-laden telecom operator with 33.3% stake. 

The move was seen as a nudge to Vodafone Idea to come up with a fundraising plan, but that hasn't materialised yet. The company continues to report losses and lose subscribers to Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd., with no plans to launch 5G operations.

As on Dec. 31, 2022, its total debt stood at Rs 2,22,894 crore, out of which the company has to pay back Rs 8,032.8 crore by 2023.

On Tuesday, shares of Vodafone Idea rose 3.67% to Rs 7.35 apiece on the BSE, even as the benchmark Sensex ended the day 0.66% lower at 61,932.47 points.