Vodafone (VOD.L) unveiled a €1.9bn (£1.6bn, $2bn) loss in the six months to 30 September after a Supreme Court ruling in India set in a motion a raft a huge fees for the telecoms giant.
“In October the Supreme Court in India ruled against the industry in a dispute over the calculation of license and other regulatory fees, and Vodafone Idea is now liable for very substantial demands made by the Department of Telecommunications (DOT) in relation to these fees,” it said in a statement.
“We are actively engaging with the government to seek financial relief for Vodafone Idea. Given the ruling our guidance now excludes recharges from India (a drag of c.€0.1 billion on our free cash flow) and Indus Towers dividends (a drag of c.€0.15 billion on our free cash flow).”
Vodafone said its liability "appears to be at least €3.7bn but could be substantially higher."
The ruling centres around the Indian government’s claim that Vodafone owes billions under its calculation of adjusted gross revenue (AGR) following a telecom tribunal judgement in 2015. Currently, operators have only paid up what they estimated was due but the DoT is demanding the alleged remainder from companies.
However, Vodafone said improvements in South Africa, Spain and Italy and a solid retail performance in Germany helped grow organic service revenue by 0.3% in the first half of the year. It also upped earnings guidance.
"I am pleased by the speed at which we are executing on the strategic priorities that we announced this time last year. This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa,” said Nick Read, CEO Vodafone.
“The consistency of our commercial performance has improved in both regions, and we have made a fast start on integrating the acquired Liberty Global businesses, where we see significant long-term opportunity.
“Our digital transformation is already creating a better experience for our customers, improving our differentiation, supporting growth and at the same time reducing our structural costs.
“We have now secured network sharing agreements across most of our major European markets, and we recently announced a major long-term wholesale partnership with Virgin Media in the UK, in order to improve the utilisation of our network assets. And we expect our European TowerCo to be operational by May next year, enabling us to continue to unlock the significant value embedded in our tower infrastructure."
Shares are tentatively moving to the upside as Vodafone returned to growth in the second quarter this year.