Late monsoon

2 November 2009 By Una Galani Follow @ugalani

First Spain, then Turkey, now India. The subcontinent is the mobile group s latest problem area. Vodafone faces a price war, a $2bn tax claim, and the exercise of a $5bn put option by local partner Essar. The real cost of the 2007 deal taking Vodafone into India is now emerging.

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Vodafone was asked by India's Central Board of Direct Taxes on October 30 to explain why it has not paid tax on the $11.2bn acquisition of a 67% stake in Hutchinson Essar in 2007.

The UKheadquartered mobile operator could be liable to for $2bn in unpaid taxes. The Indian tax authorities have given it until November 16 to respond.

Vodafone has said it is exempt from the charge because the transaction took place outside India, between Netherlandsbased Vodafone International and a Cayman Islands vehicle owned by vendor Hutchinson Telecommunications. The case is being examined by India's Supreme Court and may last several years.

Shares in Bharti Airtel fell 7% on October 30, after the Indian telecoms group posted secondquarter earnings below estimates and announced it would offer customers nationwide persecond billing, deepening a price war in the country's mobile market.

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