Vodafone has been hit by a €5 billion loss after it wrote down the value of its Indian business by €6.3 billion amid a bitter price war in the country.
Vodafone’s foray into the world’s second-most populous country now looks to be a costly mistake. The UK telecoms company had to pay €2.7 billion to acquire bandwidth last month whilst growth prospects for the sector have been revised down. The company has now pumped $7bn into its Indian subsidiary since April.
The UK-based multinational is one of three market leaders in the world’s second most populous nation but its profitability has been hit by fierce competition from new rival, Reliance Jio Infocomm, backed by India’s richest man, Mukesh Ambani. Ambani has offered customers free phone calls, forcing competitors to follow suit.
“It is very hard to compete with someone that gives stuff away for free,” said Vittorio Colao, Vodafone’s chief executive. “That said, any company that gives stuff away is not a company, it is a charity”.
Colao described competition in India as “fierce” and said this had reduced revenue growth and profitability.
“We have responded to this changing competitive environment by strengthening our data and voice commercial offers and by focusing our participation in the recent spectrum auction on acquiring frequencies in the more successful and profitable areas of the country,” he added.
Vodafone said its loss after tax soared to €5.1 billion in the six months to 30 September, double its net loss of €2.5 billion a year earlier.
Stripping out the exceptional hit from India as well as interest payments, Vodafone posted pre-tax profit of €7.9 billion for the first half, a drop of 1.7 percent compared with one year earlier.
Vodafone's share price rose 2 per cent before falling back into negative territory.
