Vodafone 2008 Annual Report Download - page 60

Financial Position and Resources continued
The terms and conditions of the €0.4 billion loan facility are similar to those of the
$11.3 billion committed bank facilities, with the addition that, should the Group’s
Turkish operating company spend less than the equivalent of $0.8 billion on
capital expenditure, the Group will be required to repay the drawn amount of the
facility that exceeds 50% of the capital expenditure.
Furthermore, two of the Group’s subsidiary undertakings are funded by external
facilities which are non-recourse to any member of the Group other than the
borrower, due to the level of country risk involved. These facilities may only be
used to fund their operations. At 31 March 2008, Vodafone India had facilities of
INR 138 billion (£1.7 billion), of which INR 118 billion (£1.5 billion) is drawn. Since
31 March 2008, Vodafone India has entered into additional facilities amounting to
INR 71.5 billion (£898 million). Vodafone Egypt has a partly drawn EGP 1.7 billion
(£156 million) syndicated bank facility of EGP 4.0 billion (£369 million) that
matures in March 2014.
In aggregate, the Group has committed facilities of approximately £9,870 million, of
which £6,174 million was undrawn and £3,696 million was drawn at 31 March 2008.
The Group believes that it has sufficient funding for its expected working capital
requirements. Further details regarding the maturity, currency and interest rates
of the Group’s gross borrowings at 31 March 2008 are included in note 24 to the
Consolidated Financial Statements.
Financial assets and liabilities
Analyses of financial assets and liabilities, including the maturity profile of debt,
currency and interest rate structure, are included in notes 18 and 24 to the
Consolidated Financial Statements. Details of the Group’s treasury management
and policies are included within note 24 to the Consolidated Financial Statements.
Option agreements and similar arrangements
Potential cash inflows
On 8 August 2007, the Group announced that it had decided not to exercise its
rights under its agreement with Verizon Communications (“Verizon”) to sell to
Verizon up to $10 billion of the Group’s interest in Verizon Wireless. There are no
other agreements, which allow Vodafone to put its interest in Verizon Wireless
to Verizon.
Potential cash outflows
In respect of the Group’s interest in the Verizon Wireless partnership, an option
granted to Price Communications, Inc. by Verizon Communications Inc. was
exercised on 15 August 2006. Under the option agreement, Price Communications,
Inc. exchanged its preferred limited partnership interest in Verizon Wireless of the
East LP for 29.5 million shares of common stock in Verizon Communications Inc.
Verizon Communications Inc. has the right, but not the obligation, to contribute
the preferred interest to the Verizon Wireless partnership, diluting the Group’s
interest. However, the Group also has the right to contribute further capital to the
Verizon Wireless partnership in order to maintain its percentage partnership interest.
Such amount, if contributed, would be $0.9 billion.
In respect of Arcor, the Group’s non-mobile operation in Germany, the capital
structure provides all partners, including the Group, the right to withdraw capital
from 31 December 2026 onwards and this right in relation to the minority
partners has been recognised as a financial liability. The Group acquired the
outstanding minority interests on 19 May 2008.
As part of the Vodafone Essar acquisition, the Group acquired less than 50%
equity interests in Telecom Investments India Private Limited (“TII”) and in Omega
Telecom Holdings Private Limited (‘Omega’), which in turn have a 19.54% and
5.11% indirect shareholding in Vodafone Essar. The Group was granted call options
to acquire 100% of the shares in two companies which together indirectly own
the remaining shares of TII for, if the market equity of Vodafone Essar at the time
of exercise is less than US$25 billion, an aggregate price of US$431 million plus
interest or, if the market equity value of Vodafone Essar at the time of exercise is
greater than US$25 billion, the fair market value of the shares as agreed between
the parties. The Group also has an option to acquire 100% of the shares in a third
company which owns the remaining shares in Omega. In conjunction with the
receipt of these options, the Group also granted a put option to each of the
shareholders of these companies with identical pricing which, if exercised, would
require Vodafone to purchase 100% of the equity in the respective company.
These options can only be exercised in accordance with Indian law prevailing
at the time of exercise.
The Group granted put options exercisable between 8 May 2010 and 8 May 2011
to members of the Essar group of companies that, if exercised, would allow the
Essar group to sell its 33% shareholding in Vodafone Essar to the Group for
US$5 billion or to sell between US$1 billion and US$5 billion worth of Vodafone
Essar shares to the Group at an independently appraised fair market value.
Off-balance sheet arrangements
The Group does not have any material off-balance sheet arrangements, as
defined in item 5.E.2. of the SEC’s Form 20-F. Please refer to notes 31 and 32 to
the Consolidated Financial Statements for a discussion of the Group’s
commitments and contingent liabilities.
Quantitative and qualitative disclosures about market risk
A discussion of the Group’s financial risk management objectives and policies and
the exposure of the Group to liquidity, market and credit risk is included within
note 24 to the Consolidated Financial Statements.
58 Vodafone Group Plc Annual Report 2008
Vodafone – Performance