Vodafone Idea (Vi), the struggling telecom operator in India, is trying to turn things around for itself with the help of the Indian government. But its promoter, Vodafone UK, seems to have stopped believing in the telco's ability to make future payments. According to an ET report, Vodafone Group has expressed concerns over the ability of Vodafone Idea Limited (VIL) to make payments. In its FY23 results report, Vodafone UK said that VIL is trying to raise funds as it is in need of additional liquidity support from its lenders.
"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", said Vodafone UK.
Vodafone UK has decided not to carry forward any losses related to VIL anymore. The group has decided to carry forward the investment value in VIL as nil. It is worth noting that after the Indian government now, Vodafone UK is the largest stakeholder in the merged telco between Vodafone India and Idea Cellular.
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Under the merger agreement between Vodafone India and Idea Cellular in 2017, a payment arrangement was established to address specific contingent liabilities related to legal, regulatory, tax, and other matters, as well as refunds pertaining to Vodafone India and Idea Cellular.
According to Vodafone's report, cash payments or receipts linked to these matters must have been made or received by Vodafone Idea Limited (VIL) before any amount is owed by or due to the Vodafone Group. If certain contractual conditions are met, any future payments from the Group to VIL resulting from this agreement will be made.
The potential financial exposure of the Vodafone Group under this arrangement is limited to INR 64 billion (€719 million). As of March 31, 2021, payments totalling INR 19 billion (€235 million) have been made by Vodafone to VIL through this mechanism.
