Vodafone's Indian Partnership Facing Severe Financial Issues - Fitch

(Alliance News) - Fitch Ratings on Tuesday said a court ruling in India could leave Vodafone ...

Alliance News 21 January, 2020 | 6:47AM
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(Alliance News) - Fitch Ratings on Tuesday said a court ruling in India could leave Vodafone Group PLC's Indian business facing "severe" liquidity problems.

Last week, the Indian Supreme Court rejected an appeal by Vodafone's Indian joint venture, Vodafone Idea, against a decision to make it pay USD4 billion in fees. Vodafone Idea is operated by Vodafone alongside Bharti Airtel Ltd.

Vodafone Idea and other firms in the beleaguered Indian telecom sector were ordered in November to pay a combined USD13 billion in past spectrum and licence fees.

"The Indian Supreme Court's rejection on January 17 of a review petition against its earlier ruling in a long-running telecommunications sector tax case, is credit negative for the industry. Two incumbents, Vodafone Idea and Bharti Airtel, will be particularly affected," said Fitch.

"The court's rulings in this case could also have significant repercussions for India's banking sector, as well as the country's broader economic outlook."

Fitch said Vodafone Idea could face "severe liquidity stress" following the ruling, with a cash balance of USD2.2 billion as of September not enough to pay its unpaid dues. The business has recently lost subscribers to rivals, Fitch noted, hampering its ability to generate cash.

One option, Fitch continued, would be for Vodafone Idea to raise money through asset sales, but it said Vodafone Idea's chair has already said the joint venture will close down if it does not get relief from the court or the Indian government.

Vodafone shares finished flat in London on Monday at 154.40 pence each.

By George Collard; georgecollard@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Vodafone Group PLC 107.66 GBX 0.30

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