Vodafone 2016 Annual Report Download - page 151

Overview Strategy review Performance Governance Financials Additional information
Vodafone Group Plc
Annual Report 2016
149
Acquisition commitments
On 15 February 2016 Vodafone announced that Liberty Global Europe Holding B.V. and Vodafone International Holdings B.V. had reached
an agreement to merge their operating businesses in the Netherlands to form a 50:50 joint venture. The joint venture will operate under both
the Vodafone and Ziggo brands and will create a nationwide integrated communications provider in the Netherlands. Based upon the enterprise
value of each business, and after deducting Ziggo’s €7.3 billion of net debt, Vodafone will make a cash payment to Liberty Global of €1 billion
to equalise ownership in the JV, reecting the €2 billion difference in the two companies’ equity value. Vodafone Netherlands will be contributed
to the JV on a debt and cash free basis. The transaction is expected to close around the end of 2016 and is subject to regulatory approvals and
consultations with the Works Councils.
During the year ended 31 March 2016 Vodafone agreed to acquire You Broadband (India) Private Limited and You System Integration Private
Limited in India for £35 million. The transaction, which is expected to close later this year, is subject to regulatory approval by the Foreign Investment
Promotion Board.
30. Contingent liabilities and legal proceedings
Contingent liabilities are potential future cash outows, where the likelihood of payment is considered more than
remote, but is not considered probable or cannot be measured reliably.
2016 2015
£m £m
Performance bonds1849 766
Other guarantees and contingent liabilities22,543 2,539
Notes:
1 Performance bonds require the Group to make payments to third parties in the event that the Group does not perform what is expected of it under the terms of any relatedcontracts
or commercial arrangements.
2 Other guarantees principally comprise Vodafone Group Plc’s guarantee of the Group’s 50% share of an AUD 1.7 billion loan facility and a US$3.5 billion loan facility of its joint venture,
VodafoneHutchison Australia Pty Limited.
UK pension schemes
The Group’s main dened benet scheme is the Vodafone UK Group Pension Scheme which has two segregated sections, the Vodafone Section
and the CWW Section, as detailed in note 26.
The Group has covenanted to provide security in favour of the Vodafone UK Group Pension Scheme – Vodafone Section whilst there is a decit
in this section. The decit is measured on a prescribed basis agreed between the Group and Trustee. In 2010 the Group and Trustee agreed security
of a charge over UK index linked gilts (‘ILG’) held by the Group.
The level of the security has varied since inception in line with the movement in the Scheme decit. At the 31 March 2016 the Scheme retains
security over £264.5 million (notional value) 2017 ILGs and £76.3 million (notional value) 2016 ILGs. The security may be substituted either
on a voluntary or mandatory basis. As and when alternative security is provided, the Group has agreed that the security cover should include
additional headroom of 33%, although if cash is used as the security asset the ratio will revert to 100% of the relevant liabilities or, where the
proposed replacement security asset is listed on an internationally recognised stock exchange in certain core jurisdictions, the trustee may decide
to agree a lower ratio than 133%. The Company has also provided two guarantees to the Vodafone Section of the scheme for a combined value
up to £1.25 billion to provide security over the decit under certain dened circumstances, including insolvency of the employers. The Company has
also agreed a similar guarantee of up to £1.25 billion for the CWW Section. An additional smaller UK dened benet scheme, the THUS Plc Group
Scheme, has a guarantee from the Company for up to £110 million.
Legal proceedings
The Company and its subsidiaries are currently, and may from time to time become, involved in a number of legal proceedings, including inquiries
from, or discussions with, governmental authorities that are incidental to their operations. However, save as disclosed below, the Company does not
believe that it or its subsidiaries are currently involved in (i) any legal or arbitration proceedings (including any governmental proceedings which are
pending or known to be contemplated) which may have, or have had in the 12 months preceding the date of this report, a material adverse effect
on the nancial position or protability of the Company or its subsidiaries; or (ii) any material proceedings in which any of the Company’s Directors,
members of senior management or afliates are either a party adverse to the Company or its subsidiaries or have a material interest adverse to the
Company or its subsidiaries. Due to inherent uncertainties, the Company cannot make any accurate quantication of any cost, or timing of such cost,
which may arise from any of the legal proceedings referred to in this Annual Report.
Telecom Egypt arbitration
In October 2009 Telecom Egypt began an arbitration against Vodafone Egypt in Cairo alleging breach of non-discrimination provisions
in an interconnection agreement as a result of lower interconnection rates paid to Vodafone Egypt by Mobinil. Telecom Egypt also sought
to join Vodafone International Holdings BV (‘VIHBV’), Vodafone Europe BV (‘VEBV’) and Vodafone Group Plc to the arbitration. In January 2015
the arbitral tribunal issued its decision. It held unanimously that it had no jurisdiction to arbitrate the claim against VIHBV, VEBV and Vodafone
Group Plc. The tribunal also held by a three to two majority that Telecom Egypt had failed to establish any liability on the part of Vodafone Egypt.
Telecom Egypt applied to the Egyptian court to set aside the decision. On 15 March 2016 the Court of Appeal dismissed Telecom Egypt’s application
to annul the arbitration award. Telecom Egypt had 60 days to appeal to the Cour de Cassation, which has now expired. Vodafone Egypt has applied
for a certicate to conrm that no appeal has been led.