India’s Supreme Court has reportedly told Vodafone to pay the Department of Telecommunications Rs20bn (US$301m) for a licence to merge several local units. The move would pave the way for an IPO next year, however the operator will likely still have to contest a higher charge claimed by the department.
India’s Supreme Court has reportedly told Vodafone (LON:VOD) to pay the Department of Telecommunications Rs20bn (US$301m) for a licence to merge several local units. The move would pave the way for an IPO next year.
However, the court held that the final amount Vodafone will need to pay to complete the process will be determined after litigation in lower courts, the Economic Times reported. The telecoms department has demanded Rs67bn (US$1bn) from the operator to help cover spectrum and regulatory charges.
The court arrived at the Rs20bn sum as Vodafone had previously offered to make an interim Rs17.7bn (US$267m) payment to move the merger process forward.
According to a Financial Times report, Vodafone plans to contest the Rs67bn charge at the Telecom Disputes Settlement and Appellate Tribunal.
A Vodafone spokesperson declined to comment.
In 2012, Vodafone sought to merge four local units – Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink – into Vodafone Mobile Services, as part of IPO preparations, which are on the backburner pending the resolution of tax disputes with the government. Vodafone Mobile Services is a unit of Vodafone India.
The UK-based telecoms group confirmed last month that it has begun preparations for a listing of its Indian unit, the country’s second-largest telco. CEO Vittorio Colao (pictured) has said a final decision will be made next fiscal year. Vodafone has hired Rothschild to look into the viability of an IPO.
Earlier this month, following a meeting with Indian Prime Minister Nahendra Modi, Colao announced plans to invest an extra Rs130bn (US$2bn) into its Indian business.
Last week, Indian government officials said they were considering Vodafone’s call for a conciliation process to resolve the tax disputes.
At the time, a Vodafone spokesperson declined to comment on specific enquiries, but said the company has always been clear about its “openness to discussing the possibility of settlement”.
The operator is one of multiple foreign companies to have faced accusations of underpaying local taxes, but there are now signs that authorities are seeking to make it easier for international firms to do business.
Last month, the Bombay High Court ruled in favour of Vodafone in a £450m (US$690m) tax case covering the treatment of a call centre and share options following its US$10.9bn takeover of Hutchison Essar in 2007.
However, an approximate US$2.6bn tax case concerning the 2007 deal remain unresolved.
An Economic Times report published before the conciliation statements said the government had offered to settle an Rs200bn (US$3bn) tax dispute with Vodafone if it agreed to pay the Rs79.98bn (US$1.2bn) principal amount, waiving interest and penalties.
