Vodafone is staying in India, CEO Nick Read blames media, takes back ultimatum, apologises to Indian government...

Last Updated: Thu, Nov 14, 2019 15:04 hrs
Nick Read

New Delhi: According to latest reports, customers and employees of Vodafone India could have a breather considering the business was likely to stay. Vodafone Group CEO, Nick Read who initially appeared critical of the business environment in India, on Thursday was reported as having shared his apology to the Indian government.

A PTI report cites Read as having written a letter to several senior government officials including the Prime Minister and Telecom Minister Ravi Shankar Prasad. The report mentions a few statements made in Read's letter. In his letter, Read squarely blames the media for picking up distorted comments and sensationalizing the case.

Read is reported as stating, "The coverage in India has been distorted and I apologise for the impression that the coverage conveys. It doesn’t accurately represent my comments..."

The report also cites a senior telecom official as saying, "The government has expressed displeasure and disapproves Vodafone CEO Nick Read statement around telecom sector in India."

Read also expressed his desire in continuing in the India operations while appreciating "the setting up of the committee of secretaries to look into potential remedies and their considerable effort."

Mentioning the momentary relief on the Adjusted Gross Revenue (AGR) related discussions, he said, "I would like to express my gratitude to the Indian government for designing a relief package in the light of the recent AGR (adjusted gross revenue) judgment and the financial stress the telecom industry is undergoing..."

Although a copy of the letter is yet to be reviewed and made available to the public, an Economic Times report mentioned that the comments were made in London while Read announced the company's quarter results.

A suggestion going around in industry and media circles is that the annual licence fee on AGR is likelly to be brought down from 8 percent to 5 percent. A two-year moratorium for deferment of payment of spectrum dues is also being reported. Vodafone-idea joint venture reportedly has a spectrum payment obligation of Rs 39,000 crores [Rs 28,000 crores in additional license fee and Rs 11,000 crores towards spectrum usage] and a deferment was likely to free up cash for capital expenditure.

Read in his latest correspondence is also reported as having strong belief in India's potential- the telecom sector, transformation for citizens and the vision of Digital India. He is reported as stating, "We remain invested in India growth story and it continues to remain a key market for us... Communication and technology have great potential to transform lives, create jobs and property for all and India is seeing it in action in Digital India"

Post the AGR decision by the Supreme Court, there has been intense speculation on the sustainability in the telecom sector. Read's initial statements lead to several analysts pondering on the sustainability of Voda-Idea JV and also the future of Vodafone in India.

On Tuesday, reports cited Nick Read making the following statements:

"either they [government] 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.

Vodafone said it had written off the carrying value of its share in the lossmaking joint venture, Vodafone Idea. Read had reportedly said, "If you’re not a going concern, you’re moving into a liquidation scenario – can’t get any clearer than that..."

Nick Read's first statement is available here.

On Wednesday, the CEO flagged off liquidation risk with Vodafone writing off the book value of its India operation.

On Thursday, fresh reports emerged that Aditya Birla Group, the other significant stake holder in Vodafone-Idea was unlikely to rope in any fresh capital. Voda-Idea shares trading on the Bombay Stock Exchange traded to a 52 week low of 2.90, down by 22 percent. The exchange house has sought clarity from the company. Voda-Idea is yet to report its disclosure with the exchange [as until the time of publication of this story].

Nick Read's sudden U-turn is likely to assuage investors and administration in the short-term, however several analysts remain skeptical of the future of the JV in India. In fact, analysts at brokerage house HSBC said that the JV was in a precarious situation.