Tax win makes case for Vodafone IPO

The Vodafone chief executive said the company’s victory in a $2.2-billion legal battle against tax authorities in India would help pave the way for a listing of shares in its business in the country.

Vodafone last week won a long-running legal battle against the tax department in a Supreme Court ruling that analysts said would encourage foreign investment and remove a barrier to an initial public offer (IPO).

“Clearly, the tax case was one of the elements. But, of course, the new telecoms policy is going to be another very important element,” Vittorio Colao told Reuters at the World Economic Forum meeting here.

“Everything that goes in the direction of stability of law and certainty of law is (positive) as we are an investment- led sector ... and, therefore, we need to have long-term visibility and stability of conditions to tell our shareholders and prospective shareholders what we are going to do.

“Stability for the future, ability to forecast what is happening, stability of the regulatory framework is extremely important. Friendliness is very important.”

Vodafone is the largest foreign corporate investor in India but has come to symbolise the perils these firms face doing business in the country. It has about 148 million users in the country, making up a considerable chunk of its 400 million subscribers worldwide. Colao said the mobile phone operator had still not yet set a time frame for an initial public offering of shares in its Indian business.

“I am positive and optimistic on the fact that our Indian operation is a very appealing operation,” he told Reuters in Davos.

Robin Bienenstock, an analyst at Bernstein Research in London, said last week that she expected Vodafone to list 30 per cent of the Indian business later this year, which could raise 3.4 billion pounds.

India’s once-booming telecom sector has struggled in recent years from competition and a scandal over alleged below-market price sale of spectrum, prompting authorities to overhaul decades-old regulations.

The country’s telecom ministry has said it will relax rules to facilitate a sector consolidation as part of a new telecoms policy, likely to be approved by June.