Vodafone India IPO unlikely In 2012

Vodafone Group PLC (VOD.LN) said Tuesday it is unlikely to launch an initial public offering at its Indian operations this year as the unit may have to deal with other issues such as a government auction of spectrum for basic mobile services amid a turmoil in the industry. The world's top mobile operator by revenue was widely expected to launch an IPO for its local unit this year after India's Supreme Court in January ruled in the company's favour in a case where authorities demanded tax on its 2007 purchase of a majority stake in Indian mobile operator Hutchison Essar Ltd. Soon after the court verdict, Vodafone appointed financial advisory firm Rothschild for the process, a person familiar with the matter said in January. But it has since been tough for Vodafone in the country where it has over 150 million customers, more than a third of its global users. The government has changed a law that will now override the court's January verdict and allow authorities to demand tax retrospectively on deals between foreign companies for transferring assets in India, as in the Vodafone-Hutchison case. For Vodafone, the tax bill could be as much as $3.75 billion, including interest and penalties. Meanwhile, the government needs to meet a directive from the Supreme Court to conduct auctions by Aug. 31 to re-allot bandwidth that the court had asked some current operators to return. "It's highly unlikely that we'll be able to do an IPO in the middle of spectrum auctions," Chief Executive Marten Pieters told reporters. The company has remained tightlipped about the IPO timelines all along. But if the company doesn't do the IPO by Aug. 18, 2013 or Feb. 8, 2014, it would need to pay Piramal Healthcare Ltd. (500302.BY) between INR70 billion ($1.27 billion) and INR83 billion ($1.51 billion) for its about 11% stake in Vodafone India. This will be applicable also if Piramal Healthcare decides not to participate in any earlier Vodafone India public offering. The auction itself is embroiled in controversy, with Vodafone and others opposing the proposals of India's telecom regulator, which has suggested a base auction price that is several times more than the price at which India has been allotting licenses and bandwidth. Pieters said despite the uncertainties, the company is still interested in participating in the bidding as it is "very committed to India." India still is among the key markets for Vodafone where it recorded a more than 19% growth in service revenue in the fiscal year ended March 31. Its operating margin in the country expanded to 26.3% from 25.7%.