Vodafone will not inject new equity into its Indian venture, Nicholas Read, CEO of Vodafone Group, said in the earnings call on Tuesday. Vodafone, the world’s second largest mobile operator reported its FY20 results on Tuesday with the group posting 2.6% increase in its core earnings. The company said that the group revenues increased 3% to 45 Billion euros but Vodafone did not provide an outlook for the current financial year due to the COVID-19 situation. Vodafone said that it is now witnessing an “direct impact” of the COVID-19 pandemic especially on its roaming revenues arising from lower international travel. Further, Vodafone said that it expects “economic pressures” to have an effect on its customer revenues over a period of time. In its earnings call, Read said that the COVID-19 situation has caused additional financial strain on Vodafone Idea that was already under “critical situation.”
Vodafone Idea Requires Financial Support Package from Government
Read said that Vodafone Idea group is currently engaged with the authorities in India to identify a path forward.
“The business requires a government support package if India wants to maintain a ‘3 plus 1 player’ telecoms market,” Read said in the earnings call.
Further, Read highlighted that the Vodafone Group accelerated its payment of US$200 billion to Vodafone Idea which was due in September 2020 under the contingent liability mechanism terms with Vodafone Idea.
“Vodafone Group's position remains unchanged,” Read said. “We will not inject new equity into our Indian joint ventures.”
However, Read said that the Vodafone Group will work on the merger between Indus with Bharti Infratel as it would provide cash proceeds for Vodafone Idea at the completion of merger.
Vodafone Group Losses Would Have Been Higher Due to Vodafone Idea
Vodafone highlighted that the carrying value of Vodafone Idea has been reduced to zero and that the recognized share of losses would have been “substantially higher” due to its Indian venture.
“As the Group has no obligation to fund Vodafone Idea Limited (“Vodafone Idea”) losses, the Group has recognised its share of estimated Vodafone Idea losses arising from both its operating activities and those in relation to the AGR judgement to an amount that is limited to the remaining carrying value of Vodafone Idea, which is therefore reduced to €nil,” Vodafone said. “If the carrying value had been high enough not to restrict the Group’s share of losses, then the recognised share of losses would have been substantially higher.”