India’s Supreme Court has hit Vodafone with a Rs20bn ($301m) charge over its plans to bring together four regional subsidiaries in preparation for a long-awaited initial public offering in the country.
The ruling allows the UK-based telecoms group to move ahead with the merger, paving the way for its IPO, but still leaves it facing a further regulatory fight over a higher Rs69bn charge demanded by India’s telecoms regulator to complete the same process.
This month Vodafone confirmed it had restarted plans for a likely flotation, saying in a statement it had “begun preparations for a potential IPO of Vodafone India, subject to market conditions”.
Vodafone previously examined an IPO in 2012 but put plans on hold as it fought a series of battles with India’s government over allegations of unpaid tax and other regulatory issues.
This year the company, which operates India’s second-largest mobile network by subscribers, restarted internal preparations by hiring Rothschild, the investment bank.
India stands at the forefront of Vodafone’s hopes for a future rapid expansion in emerging markets, as it seeks to offset slowing revenue growth in more mature European markets such as Germany and Italy.
Monday’s Supreme Court judgment is the latest in a series of court battles fought by Vodafone in India, where it is the country’s largest foreign investor. This month Vittorio Colao, chief executive, announced plans to invest an extra Rs130bn into the group’s Indian operations.
It also comes as Arun Jaitley, finance minister, has hinted that India’s government might look again at Vodafone’s longest-running $2.6bn tax dispute, dating back to its 2007 takeover of mobile operator Hutchison Essar.
As part of earlier IPO preparations, Vodafone had applied to merge four subsidiaries through which it holds licences — Vodafone East, Vodafone South, Vodafone Cellular and Vodafone Digilink — with its main holding company.
The Supreme Court’s verdict follows a lengthy back-and-forth over regulatory fees and spectrum transfer charges which India’s telecoms ministry says should be paid over the merger. Vodafone declined to comment.
Earlier this year, the telecoms ministry issued a notice demanding payment of Rs66.8bn ($1bn) to complete the process. Vodafone launched an appeal, which eventually led the Supreme Court on Monday to suggest an interim payment of Rs200bn ($300m) to allow the merger to move ahead.
Vodafone now plans to contest the higher $1bn payment at a forthcoming meeting of India’s Telecom Disputes Settlement and Appellate Tribunal, a special regulatory court dealing with disagreements between operators and regulators.
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