* India Supreme Court ruling latest blow for beleaguered
sector
* Vodafone upgrades full-year core earnings forecast
* Organic service revenue returns to growth in Q2
* Shares up 1.3%
*
(Recasts, adds further comments)
By Paul Sandle
LONDON, Nov 12 (Reuters) - Vodafone said its future
in India could be in doubt unless the government stopped hitting
operators with higher taxes and charges, after a court judgment
over license fees resulted in a 1.9 billion euro group loss in
its first half.
Chief Executive Nick Read said India, where Vodafone formed
a joint venture with Idea Cellular in 2018, had been "a very
challenging situation for a long time", but it remained a
sizable market where Vodafone had a 30% share.
"Financially there's been a heavy burden through
unsupportive regulation, excessive taxes and on top of that we
got the negative supreme court decision," he said on Tuesday.
Vodafone had asked the government for a relief package
comprising a two-year moratorium on spectrum payments, lower
license fee and taxes and waiving of interest and penalties on
the Supreme Court case, which centred on regulatory fees.
Asked if it made sense for Vodafone to remain in India
without any relief package, he said: "It's fair to say it's a
very critical situation."
Read said Vodafone was not committing any more equity to
India and the country effectively contributed zero value to the
company's share price.
Vodafone's shares were up 0.6% at 161 pence at 0931 GMT as
investors focused on an upgrade to its earnings forecast rather
than India.
Vodafone, the world's second largest mobile operator,
reported improving organic revenue growth as it saw signs of
improvement in Spain and Italy and as it integrates its German
cable acquisition.
It reported organic service revenue growth of 0.3% in the
first half, as it returned to growth in the second quarter,
while organic core earnings rose 1.4%.
It increased its forecast for adjusted core earnings to
14.8-15.0 billion euros from its previous forecast of 13.8-14.2
billion euros, but said India and lower cash flows following the
sale of assets in New Zealand meant free cash flow would be
"around" 5.4 billion euros, rather than "at least" 5.4 billion
euros, as it previously forecast.
Read said he was pleased with progress in executing his
strategy.
"This is reflected in our return to top-line growth in the
second quarter, which we expect to build upon in the second half
of the year in both Europe and Africa," he said on Tuesday.
Read cut Vodafone's dividend for the first time in May after
tough market conditions and a need to invest in its networks and
airwaves caused him to backtrack on his pledge not to reduce the
payout.
(Editing by Kate Holton and Kirsten Donovan)
Vodafone (VOD)