Vodafone set to pay £350m in tax dispute

Stephen Dinneen
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FONE was yesterday told it must pay £350m in relation to its Indian tax dispute within the next three weeks.

The telecoms giant must also make a bank guarantee worth £1.2bn within eight weeks.

Vodafone is embroiled in a legal battle with Indian authorities over a disputed capital gains tax bill relating to its 2007 purchase of Hutchison Whampoa’s mobile business.

A Vodafone spokesman told City A.M.: “This is part of the legal process and Vodafone will comply with the ruling. As we understand it the money will be paid back with interest if the case goes in our favour.”

He added: “We are confident there is no tax liability resulting from this transaction and all the tax and legal advice it has received remains consistent with this view.”

The Supreme Court will hold its next hearing for the case on 24 February, although Vodafone is desperate to settle the matter out of court.

Vodafone has placed India at the centre of its growth plans as it pursues fast-growing markets.

It recently offloaded its £3.1bn stake in Japanese carrier SoftBank. It also disposed of its £4.3bn interests in China Mobile.

Last week Vodafone chief executive Vittorio Colao predicted its Indian business will eventually eclipse its European ventures in terms of revenue. He pointed to the relatively low level of data penetration in the market as a potential goldmine as smartphones continue their shift to the mainstream. This year Vodafone was forced to take a £2.3bn impairment charge on the division thanks to fierce competition and rapidly escalating spectrum costs.


Hutchison Essar is founded under the name Max Touch, renaming to Orange in 2000.

February 2007
Vodafone acquires Hutchison Essar for $11bn (£7.5bn).

December 2008
An Indian court dismisses a petition against a $2bn tax bill relating to Vodafone’s purchase.

February 2010
Vodafone is forced to take a £2.3bn impairment charge on the division thanks to fierce competition and spectrum costs.

May 2010
Vodafone pays £1.74bn for a section of the Indian mobile phone spectrum to provide 3G services. The telecoms giant was involved in a fierce bidding war that pushed the price far higher than it hoped to pay – three times the predictions of some analysts.

November 2010
Vodafone solidifies India in its strategy when it announces it will offload its stake in Japan’s Softbank