Vodafone Group Plc Chief Executive Officer Arun Sarin, on Friday, said the world's largest wireless company is contesting a $2 billion demand made by Indian tax authorities related to its purchase of Vodafone Essar Ltd, formerly Hutchison Essar Ltd.
“Vodafone is not liable to pay the tax,” he told reporters in Mumbai after the board meeting.
Mr Sarin arrived in India to kick off the rebrand exercise, one of the biggest in India. Vodafone Essar had filed a writ petition in the Mumbai High Court seeking the quashing of a show cause notice served on the company by the income tax department.
The income tax department had recently issued a show cause notice to Vodafone Essar (formerly Hutchison Essar) asking to explain why it should not be regarded as an ‘agent’ of Vodafone under the income tax law. This move of the tax department was seen as an attempt to collect capital gains tax on the $11.1 billion Vodafone-Hutchison deal that led to transfer of control in Hutchison-Essar from the Hong Kong-based Hutchison Telecom International to UK-headquartered Vodafone. The first hearing on the petition is expected to come up on September 27.
Further, Mr Sarin ruled out any immediate plans for an initial public offering. “There’s plenty of capital,” Mr Sarin said, adding “there’s no reason for us to go for an IPO.”
Vodafone holds a 52 per cent stake in Vodafone Essar, and Mumbai-based Essar Group owns 33 per cent. Vodafone Essar Managing Director Asim Ghosh and Indian businessman Analjit Singh own the remaining 15 per cent.
Cheap cellphones
Vodafone Essar, which will spend nearly Rs 250 crore on a high-profile brand transition from Hutch to Vodafone is poised to launch cheap cellphones in India under the Vodafone brand. It will also launch co-branded handsets sourced from major global vendors.
The industry buzz is that Vodafone would lower the entry barrier to an unbelievable Rs 666.The high-profile brand transistion will also coincide with the company launching cheap cellphones under the Vodafone brand and co-branded handsets.
The move also comes close on the heels of Reliance Communications (RCOM) launching mobile handsets at prices starting Rs 777 and industry experts say that Vodafone would lower the prices by Rs 100 of its phones. India will become the 26th country where Vodafone has operations, covering across five continents and 40 partner networks with over 200 million customers worldwide.
