New Delhi: The price wars in the Indian telecom market have pushed the value of Vodafone's local joint venture to zero or nil as Vodafone CEO Nick Read indicated that the Indian operation is headed for liquidation unless the Indian government provides relief on mobile spectrum fees.
The parent company, Vodafone, has written off the book value of the Indian business. As per financial results released by Vodafone Group on Tuesday, the book value of Vodafone's 45 per cent stake in joint venture, Vodafone Idea, slumped to zero in November 2019.
Contrast this with the fact that the book value was more than 2 billion euros in June 2018, but in May of this year, the book value had been reduced to 1.5 billion euros.
In the financial results released on Tuesday, most of Vodafone's bad news came from India. This included write-downs, losses, reduced cash flows and provisions for the Supreme Court judgement.
The British media has called Vodafone’s ultimatum not to pump in more capital in India, a "potentially disastrous but fitting end to its big bet on India," where the destruction of value has been complete.
According to British media reports, the CEO has communicated to the government that "either they should take their boots off the neck of the industry and allow it to better compete with Mukesh Ambani on 5G, or Vodafone Idea is destined for a potentially chaotic final act with potential repercussions for India's international standing."
Vodafone entered the market in 2007 via a multibillion-pound acquisition. Since then it has pumped in billions more, always hoping that the sheer scale of India would one day deliver returns to match.
"Throughout, however, Indian officialdom welcomed Vodafone with all the warmth of a Himalayan mountaintop. It has been in court since the moment it arrived and used as a soft target by politicians and taxmen. The destruction of value has been complete," a report said.
According to reports, the Vodafone chief executive feels they have had enough in the Indian market as a major foreign investor. Vodafone, the reports suggest, is also unhappy with the way several policy decisions have gone against it and favoured Reliance Jio.