Narendra Modi, consider the gauntlet thrown down.
Vodafone today made the choice of the Prime Minister of India starker than it has ever been; either you counter your judiciary’s attack on us, or we leave.
The mobile giant has been fighting for years against India’s punitive tax regime. Then, in October, from a clear blue sky came a new assault — a demand by the Supreme Court that it, and others, pay $14 billion for more than a decade of unpaid duty.
It felt like a shakedown, And, despite Vodafone’s huge 30% share in the market — and that of its similar-sized rival Bharti Airtel — neither can afford it. Unless Modi comes up with a compromise they will be bust. The only major player left will be newcomer Mukesh Ambani’s Reliance Jio.
Having arrived late on the scene, India’s richest man, who price-cut his own brother’s mobile firm out of business, will not be hit by the Supreme Court blunderbuss.
For Modi, this matters, big time. For starters, it’s far from clear Jio can cope with 500 million or so Voda and Airtel clients suddenly moving onto its network. But longer term, it leaves this vital infrastructure in the hands of one man, free to charge what he pleases and invest as the whim takes him. Is that really what Modi wants?
Furthermore, the world’s CEOs are watching Vodafone’s travails and wondering — “is this a safe place to invest?”
He should weigh up these factors and offer a tax relief solution. If he does, India could once again be a great business for Vodafone. With the $14 billion due in January, we’ll find out soon enough.
