The Indian government has issued an angry rebuke to Vodafone’s chief executive over his perceived threats to pull out of the country over a shock $4 billion (£3.1 billion) tax demand.
This week, Nick Read fired a broadside at the administration of Prime Minister Narendra Modi following a ruling in the Supreme Court of India last month declaring the mobiles industry must pay $14 billion in back taxes.
Modi’s administration was clearly furious at the attack, and senior officials in the telecoms ministry responded in the Indian media with "deep disapproval and unhappiness" at the tone and tenor of his comments at such a sensitive time.
Vodafone has around a third of the vast Indian mobile phones market, with some 300 million customers. Read had effectively threatened to stop operating there saying: “If they don’t provide a relief package, we are in the situation of: ‘is this worth being a going concern?’”
At the same time, Vodafone slashed the value of its vast Indian business in its accounts to zero. Investors had already come to terms with the fact that its €1.39 billion (£1.19 billion) value on the books, plus the €1.4 billion Vodafone invested in an Indian rights issue this year were worthless.
However, the move was seen as a way of bolstering Vodafone’s “nothing to lose” negotiating position.
Read has already visited Indian officials to lobby for some kind of relief from the tax demand, pointing out that Vodafone had invested billions of dollars in the country and was one of, if not the biggest foreign direct investor.
Coverage of Read’s comments this week were amplified in the Indian media.
Read responded to the officials’ complaints yesterday, apologising for the “distortion” of his comments in the Indian press.
“The point I made was that the situation in India had reached a critical stage,” he wrote, adding: “You have my word that Vodafone wishes to continue its long history in India given the right conditions.”
Vodafone’s Indian business comprises a 45.2% stake in Vodafone Idea, a joint venture with the local Aditya Birla Group.
Sources at Aditya Birla have echoed Read’s earlier statements, saying they would let the venture go insolvent if the government does not provide substantial relief, the Indian Economic Times reported.