Vodafone Group Deems Its Vodafone Idea Investment At Zero.

Vodafone Plc, a British telecom business, announced its FY23 profits and said that the Group’s carrying value of the investment in the Indian-listed firm Vodafone Idea is zero. Furthermore, the Group has recorded no further losses revolving around Vi. Nonetheless, troubled-laden Vi still demands extra cash and intends to raise capital in the future. In addition, the firm stated in its FY23 report that VIL continues to demand more liquidity support from its lenders and wants to obtain additional funds.

There are significant concerns revolving around VIL’s capacity to make payments on any outstanding liabilities covered by the mechanism, and no other cash payments from the Group are considered probable as of March 31 2023, it said. When Vodafone and Idea Cellular agreed to merge in 2017, the parties agreed to a payment mechanism between the Group and Vi based on the difference between the crystallisation of certain identified contingent liabilities in terms of legal, regulatory, tax, and other cases and refunds relating to Vodafone India and Idea Cellular.

Furthermore, in the process, VIL must have made or received cash payments or cash receipts connected to these concerns before any amount becomes due from or payable to the Group.

As an outcome, any future payments made by the Group to VIL due to this agreement would be made only if this and other contractual criteria were met. So, according to the UK-based telco, Vodafone Group’s possible exposure to liabilities within VIL is limited by the mechanism outlined above; consequently, future obligations arising from litigation in India concerning operations of Vodafone India are not disclosed.”

Vodafone Plc’s potential exposure under this mechanism is restricted at 64 billion (€719 million) following payments made from Vodafone to VIL, totalling 19 billion (€235 million) in the fiscal year ending March 31 2021.

On February 7, this year, Vi issued equities to the Indian government worth 1.8 billion euros, displaying the net present value of interest accrued on both deferred spectrum auction instalments and AGR dues under a relief package announced in September 2021 to improve the telecom sector’s liquidity and financial health.

However, there is some ray of hope.

Despite the UK-based Vodafone Group seeing a slowdown in FY23 profitability, Vodafone Idea’s stock price rose this week. Nonetheless, the reported fiscal year results were in line with forecasts. The stock is gaining traction due to Vodafone Group’s core strategy plan, which focuses on consumers, simplicity, and growth. The Group’s new CEO plans to reform Vodafone in order to streamline its organisation, reduce complexity, and increase competitiveness.

Vodafone Group’s FY23 performance.

The Group’s overall revenue climbed by 0.3% to €45.7 billion in FY23 (FY22: €45.6 billion), led by growth in Africa and more excellent equipment sales, offset by lower European service revenue and unfavourable currency rate moves.

While adjusted EBITDA fell 1.3% to €14.7 billion (FY22: €15.2 billion), the revenue increase was offset by higher energy costs and underperformance in Germany. The adjusted EBITDA margin was 32.1%, 1.4 percentage points lower year on year.

Furthermore, operational profit increased to €14.3 billion, and the Group achieved a profit of €12.3 billion (FY22: €2.8 billion), primarily due to a gain on the sale of Vantage Towers.

In addition, Vodafone’s net debt was reduced significantly to €33.4 billion, and the proforma net debt to adjusted EBITDA ratio decreased to 2.5x. Furthermore, the Group’s total dividends per share are 9.0 euro cents, with a final fiscal dividend per share of 4.5 euro cents.

The Vodafone Group’s need for transformation.

According to Della Valle, the CFO, the European telecommunications industry has one of the lowest ROCEs in Europe and one of the greatest capital investment demands. As a result, ROCE has been lower than WACC for over a decade, affecting Total Shareholder Returns. More crucially, she stated Vodafone’s competitive performance has deteriorated over time, linked to the customers’ experiences.

Furthermore, Vodafone’s market position and performance differ depending on geography and category. The firm said that it can grow and produce returns if the company has outstanding local performance and a logical market structure. Significant disparities exist between the Consumer and Business divisions, with Business expanding in almost all European markets.

As a result, the Group stated that its top goals are customers, simplicity, and expansion. To recover competitiveness, the company will streamline its operations and eliminate complexity. They will reallocate resources to provide the excellent service that their clients expect and to capitalise on Vodafone Business’s unique position.

Vodafone Group’s early-stage plans include the following.

• Customers: Significant investment was shifted to customer experience and brand in FY24.
• Simplicity: 11,000 position reductions are expected over the next three years, with both headquarters and local markets simplified.
• Growth strategies include a Germany turnaround plan, continuous pricing action, and a strategic assessment in Spain.

Hope these strategies work and the firm departs some good news!

Proofread & Published By Naveenika Chauhan