Vodafone PLC liability for AGR capped at Rs 8,400 cr, blames SC order

Vodafone PLC Group no longer consolidates its previous interest in Vodafone India
British telecom giant Vodafone PLC, which owns a majority stake in Vodafone Idea, blamed its share of losses related to its Indian arm on the adverse legal judgements by the Supreme Court, and decided to value its Vodafone Idea shares at zero.

 Besides, the British operator said it would have an additional potential exposure of Rs 8,400 crore for the contingent liabilities of the Indian telecom company.

“Significant uncertainties exist in relation to Voda Idea’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,” Vodafone PLC said in a statement.

In October last year, the Supreme Court had ordered Vodafone Idea to pay Rs 53,000 crore to the government as AGR (adjusted gross revenue).

“As the Vodafone PLC Group has no obligation to fund Vodafone Idea’s losses, the group has recognised its share of estimated Vodafone Idea losses arising from both 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,” it said.

The group’s potential exposure is capped at Rs 8,400 crore, and any cash payment or receipt relating to these contingent liabilities and potential refunds must have been made or received by Vodafone Idea before any amount becomes due from or owed to the group.

“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,” it said.
Having considered the payments made and refunds received by Vodafone Idea in relation to AGR and other matters, the group has assessed a cash outflow of €235 million under the agreement to be probable at this time and provided for this amount on March 31, 2020.

Vodafone PLC no longer consolidates its previous interest in Vodafone India. Vodafone India was earlier valued based on the number of shares the group held in the merged entity and the Idea share price on August 31, 2018 at Rs 51.50 a share.
The value was also adjusted for the proceeds from the sale of the 4.8 per cent stake in Vodafone Idea from the Vodafone Group to Aditya Birla Group (ABG).

As a result of the transaction, the group recognised a net loss of €3.4 billion, including a loss on disposal of €1.27 billion and foreign exchange loss of €2 billion, it said.

Regarding the merger of Indus Towers with Bharti Infratel, Vodafone PLC said it has extended the long stop date on its agreement to merge Indus Towers and Bharti Infratel to June 24, with each party retaining the right to terminate and withdraw the merger scheme on or prior to June 24.

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