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By Kate Holton and Devidutta Tripathy
LONDON/NEW DELHI, May 20 (Reuters) - Vodafone bossVittorio Colao has challenged India's new government to back upits pro-business credentials by resolving the telecoms group'slong-running tax dispute in the country.
The British company became India's largest overseascorporate investor when it acquired Hutchison Whampoa's Indian mobile assets in 2007 as part of its strategyof chasing growth in emerging markets.
The Indian authorities argued that the transaction wasliable to be taxed in India, a claim rejected by Vodafone, whichsaid that, even if tax was due, it should be paid for by theseller rather than the buyer.
The $2.2 billion standoff has played out in courts acrossthe country ever since and has been held up by the businesscommunity as a symbol of the perils foreign businesses face fromoperating in India.
Speaking as the group released full-year results showingstrong growth in India and weak trading elsewhere, Colao calledon Narendra Modi's new government to finally tackle the problem.
"I read during the electoral campaign very pro-business ...statements from the winning party," he told reporters in London."Therefore I am optimistic that the BJP (Bharatiya Janata Party)will quickly do something to restore confidence in the country.
"We had an issue that has been really damaging to the Indianreputation, which is this retrospective taxation. Maybe this isactually a great opportunity for the new government to make astatement about how open the country is again."
Vodafone, the world's second-largest mobile operator,thought it had finally secured victory in the case in 2012, whenIndia's Supreme Court dismissed the tax demand. But thegovernment responded by announcing retrospective legislationthat would change the rules.
INTERNATIONAL ARBITRATION
Vodafone, which could float its Indian business if itresolves the tax issue, said this month that it had beguninternational arbitration proceedings against the Indiangovernment, stepping up the pressure in the high-profiledispute.
"I will engage in any conversation that they deemnecessary," Colao said of the new government.
Modi stormed to victory in the country's election last week,giving his party a mandate for sweeping economic reform.
As well as the tax issue, Vodafone has had to contend with afierce price war in India and unpredictable government rulings.But recent results have shown prices stabilising and anincreasing number of customers taking more expensive datapackages.
The unit, India's second-biggest mobile phone carrier, saidon Tuesday that it had made its first annual net profit sinceVodafone entered the country.
India's crowded mobile phone market of a dozen players hasbeen hungry for consolidation, but deals have been few and farbetween, mainly because of stricter rules and heavy debt levelsat potential target companies.
Vodafone India Chief Executive Marten Pieters said the groupwould rather buy specific assets, such as mobile frequencycapacity, than whole companies. (Editing by David Goodman)
