Vodafone 2011 Annual Report Download - page 53

Vodafone Group Plc Annual Report 2011 51
Performance
Under the terms and conditions of the €4.2 billion and US$4.2 billion
syndicated committed bank facilities lenders have the right, but not the
obligation, to cancel their commitments and have outstanding advances
repaid no sooner than 30 days after notification of a change of control. This
is in addition to the rights of lenders to cancel their commitment if we
commit an event of default; however, it should be noted that a material
adverse change clause does not apply.
The facility agreements provide for certain structural changes that do not
affect the obligations to be specifically excluded from the definition of a
change of control.
The terms and conditions of the €0.4 billion loan facility maturing on
14 February 2014 are similar to those of the €4.2 billion and US$4.2 billion
syndicated committed bank facilities with the addition that, should our
Turkish operating company spend less than the equivalent of €0.8 billion on
capital expenditure, we will be required to repay the drawn amount of the
facility that exceeds 50% of the capital expenditure.
The terms and conditions of the €0.4 billion loan facility maturing 12 August
2015 are similar to those of the €4.2 billion and US$4.2 billion syndicated
committed bank facilities with the addition that, should our Italian operating
company spend less than the equivalent of €1.5 billion on capital
expenditure, we will be required to repay the drawn amount of the facility
that exceeds 18% of the capital expenditure.
The loan facility agreed on 15 September 2009 provides €0.4 billion of seven
year term finance for the Group’s virtual digital subscriber line (‘VDSL’)
project in Germany. The terms and conditions are similar to those of the
€4.2 billion and US$4.2 billion syndicated committed bank facilities with the
addition that should the Group’s German operating company spend less
than the equivalent of €0.8 billion on VDSL related capital expenditure, the
Group will be required to repay the drawn amount of the facility that exceeds
50% of the VDSL capital expenditure.
The Group entered into an export credit agency loan agreement on
29 September 2009 for US$0.7 billion. The terms and conditions of the
facility are similar to those of the €4.2 billion and US$4.2 billion syndicated
committed bank facilities with the addition that the Company is permitted
to draw down under the facility based on the eligible spend with Ericsson up
until the final drawdown date of 30 June 2011. Quarterly repayments of any
drawn balance commenced on 30 June 2010 with a final maturity date of
19 September 2018.
Furthermore, certain of our subsidiaries 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 2011 Vodafone Essar had
facilities of INR 281 billion (£3.9 billion) of which INR 262 billion (£3.7 billion)
is drawn. Vodafone Egypt has a partly drawn EGP 1.2 billion (£121 million)
syndicated bank facility of EGP 4.0 billion (£418 million) that matures in
March 2014. Vodacom had fully drawn facilities of ZAR 8.1 billion
(£741 million), US$120 million (£73 million) and TZS 87 billion (£36 million),
Vodafone Americas has a US$1.4 billion (£871 million) US private placement
with a maturity of 17 August 2015 and Ghana had a fully drawn facility of
US$75 million (£47 million) with a final maturity of 15 March 2018.
In aggregate we have committed facilities of approximately £15,703 million,
of which £7,247 million was undrawn and £8,456 million was drawn at
31 March 2011.
We believe that we have sufficient funding for our expected working
capital requirements for at least the next 12 months. Further details
regarding the maturity, currency and interest rates of the Group’s gross
borrowings at 31 March 2011 are included in note 22 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 22
to the consolidated financial statements. Details of our treasury
management and policies are included within note 21 to the consolidated
financial statements.
Option agreements and similar arrangements
Potential cash outflows
In respect of our 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 our interest. However, we also have the right to
contribute further capital to the Verizon Wireless partnership in order to
maintain our percentage partnership interest. Such amount, if contributed,
would be US$0.8 billion.
Our aggregate direct and indirect interest in Vodafone Essar Limited (‘VEL’),
our Indian operating company, is 59.9% at 31 March 2011. We have call
options to acquire shareholdings in companies which indirectly own a
further 7.1% interest in VEL. The shareholders of these companies also have
put options which, if exercised, would require us to purchase the remaining
shares in the respective company. If these options were exercised, which can
only be done in accordance with Indian law prevailing at the time of exercise,
we would have a direct and indirect interest of 67.0% in VEL. On 30 March
2011 the Essar Group exercised its underwritten put option over 22.0% of
VEL following which, on 31 March 2011, we exercised our call option over the
remaining 11.0% of VEL owned by the Essar Group. The consideration due
under these two options is US$5 billion (£3.1 billion). The Group does not
believe that there is any legal requirement to withhold tax in respect of these
transactions but as discussed on page 122, if the Authority for Advanced
Rulings directs tax to be withheld, this amount is anticipated to be
approximately an additional US$1 billion.
Off-balance sheet arrangements
On 7 January 2011 State Bank of India provided a guarantee on our behalf
of INR 85 billion (£1.2 billion) to the Supreme Court of India in relation to the
ongoing litigation in respect of the purchase of Vodafone Essar Limited as
disclosed on page 122. We have counter indemnified State Bank of India for
any amounts payable under this guarantee.
Other than this guarantee we do 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 27 and 28 to the consolidated financial statements for a discussion
of our commitments and contingent liabilities.
Quantitative and qualitative disclosures about market risk
A discussion of our financial risk management objectives and policies and
the exposure of the Group to liquidity, market and credit risk is included
within note 21 to the consolidated financial statements.