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Vodafone takes €1.9bn punch to wallet thanks to India's decision on airwave licence fees

UK profits also down due to opex shift to IBM's cloud

Vodafone reported a loss of €1.9bn (£1.6bn) in its latest half-year results ended 30 September, chalked up mainly to India's decision to change the way it charges telcos for using airwaves.

In October, India's Supreme Court ruled against the industry in a dispute over the calculation of licensing and other regulatory fees, with Vodafone now liable "for very substantial demands", it said.

Overall revenue rose 0.4 per cent to €21.94bn (c £18.84bn), while sales in the UK were flat at €2.45bn (c £2.1bn) and EBITDA fell 0.8 per cent to €658m (c £565m).

The company blamed its sluggish performance in Blighty on higher annual licence fees and "a reallocation of costs from capex to opex following our new Cloud partnership with IBM for Vodafone Business".

The firm's results include two months of the acquired Liberty Global Eastern Europe assets for €10.3bn (c £8.85bn) and four months of Vodafone New Zealand prior to its disposal for €2bn (c £1.72bn).

Nick Read, group chief exec, said Voda has started integrating the acquired Liberty Global cable businesses, adding that its "digital transformation" is helping to reduce 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."

Vodafone plans to monetise its mobile towers over the next 15 months. The entity would have EBITDA of around €900m, with its sale helping to pay down Vodafone's debt following the Liberty acquisition.

Philip Carse, analyst at Megabuyte, said: "These results once again highlight just how problematic India has been for Vodafone, with a very tough market, an onerous tax regime and now an adverse court ruling on licence fees that is significant enough to impact the Group cash flow outlook."

He added that the UK "remains a tough market, though the recent wholesale deal with Virgin Media suggests a more aggressive approach by local management".

Vodafone's MVNO agreement with Virgin Mobile, replacing BT, is worth around £200m per year, estimates Carse.

Yesterday, the company also inked a deal with BT's Openreach to expand its gigabit broadband network by 500,000 premises – on top of its existing deal with alternative network provider CityFibre for 5 million premises.

During its second quarter, the company added another 61,000 new fixed broadband customers, bringing its total base to 667,000. ®


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