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Vodafone half yearly results hit by Indian operations
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SME Times News Bureau | 12 Nov, 2019
Vodafone announced its financial
results for the six months ended September 30 with several adverse
comments from its Indian operations including losses.
Vodafone
announced that loss for the financial period of €1.9 billion primarily
reflects losses in relation to Vodafone Idea post an adverse judgement
against the industry by the Supreme Court.
It also announced a
lower free cash flow of around €5.4 billion, previously "at least €5.4
billion", as lower cashflows from India and the sale of New Zealand
offset the initial accretion from the Liberty Global acquisitions.
The
group made a loss for the period of €1.9 billion, primarily reflecting a
loss at Vodafone Idea following an adverse legal judgement against the
industry by the Supreme Court, partially offset by a profit on the
disposal of Vodafone New Zealand.
"We have extended the long stop
date on our agreement to merge Indus Towers and Bharti Infratel, which
is still awaiting regulatory approval from the Department of
Telecommunications, having received all other required approvals,"
Vodafone said.
The six months ended September 30 includes
impairment charges of €3.5 billion in respect of the Group's investments
in Spain, Vodafone Idea and Romania.
On the Supreme Court
judgement, Vodafone results said that in October, the Supreme Court in
India ruled against the industry in a dispute over the calculation of
licence and other regulatory fees, and Vodafone Idea is now liable for
very substantial demands made by the Department of Telecommunications in
relation to these fees.
"We are actively engaging with the
government to seek financial relief for Vodafone Idea. Given the ruling
our guidance now excludes recharges from India (a drag of €0.1 billion
on our free cash flow) and Indus Towers dividends (a drag of €0.15
billion on our free cash flow)," it said.
On the operations of
Vodafone Idea, Vodafone said in October 2019, the Indian Supreme Court
gave its judgement in the "Union of India v Association of Unified
Telecom Service Providers of India" case regarding the interpretation of
adjusted gross revenue ('AGR'), a concept used in the calculation of
certain regulatory fees.
"As the Group has no obligation to fund
VIL losses, the Group has recognised its share of estimated Vodafone
Idea Limited ('VIL') 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 VIL, which is therefore reduced to €
nil," Vodafone said. It has recognized the losses and the carrying value
is reduced to nil.
"If the carrying value had been high enough
not to have restricted the Group's share of losses, then the recognised
share of losses would have been substantially higher," it said.
The
adjusted other income and expense was a €0.9 billion charge (September
30, 2018: €0.3 billion charge), primarily due to losses incurred in
Vodafone Idea Limited , offset by the profit recognised on the disposal
of Vodafone New Zealand of €1.1 billion.
In the notes on
investment in associates and joint arrangements, Vodafone said the
equity accounted results for Vodafone Idea Limited ('VIL') for the
period included an estimate for a material charge for amounts due
following the recent Supreme Court of India judgement in the case Union
of India v Association of Unified Telecom Service Providers of India and
others regarding the definition of adjusted gross revenue ("AGR") used
to calculate regulatory fees.
"The Group's recorded share of
VIL's resulting losses has been restricted to the amount that reduces
the Group's carrying value in VIL to €nil at 30 September 2019. The
Group's carrying value was €1,392 million at 31 March 2019 and in May
2019 the Group invested €1,410 million via a rights issue," it said.
"Significant
uncertainties exist in relation to VIL's ability to generate the cash
flow that it needs to settle, or refinance its liabilities and
guarantees as they fall due, including those relating to the AGR
judgement. VIL is seeking relief from the Indian government, including,
but not limited to, granting a waiver of interest and penalties relating
to the AGR judgement. The value of the Group's 42 per cent shareholding
in Indus Towers Limited ('Indus') is, in part, dependent on the income
generated by Indus from tower rentals to major customers, including VIL.
Any inability of these major customers to pay such amounts in the
future may result in an impairment in the carrying value of the Group's
investment in Indus (30 September 2019: €0.6 billion)," it said.
On
the discontinued operations and assets and liabilities held for sale,
Vodafone said in the comparative period, Vodafone combined its
subsidiary, Vodafone India (excluding its 42 per cent stake in Indus
Towers), with Idea Cellular in India.
Consequently, Vodafone
India was accounted for as a discontinued operation for all periods up
to August 31 2018, the date the transaction completed.
"For the
five months ended August 31, 2018, the group recorded a loss on disposal
of Vodafone India of €3,420 million. This loss is presented within
discontinued operations," it said.
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Customs Exchange Rates |
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Import |
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