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Vodafone loses 642 million after Ono cleanup

Source: El Pais - Wed 24th Jun 2015
Vodafone loses 642 million after Ono cleanup

British telecoms giant Vodafone has decided to use the first tax year in which it has control of Spanish cable operator Ono to put the company's accounts in order.

Ono, which Vodafone bought in July of last year for 7.2 billion, closed 2014 with consolidated losses of 642 million after repurchasing debt, admitting the depreciation of assets, making provisions for defaulting clients, accepting Tax Agency reports pertaining to fraud committed by the previous management, and paying out large bonuses to directors.

Vodafone had already admitted that Ono's consolidation had left a 400 million hole in the group's accounts for part of the last tax year. But now the accounts deposited with the Spanish business registry reveal that those losses totaled 642.2 million for the whole of 2014 most of which was attributable to the company's operating subsidiary Cableuropa, now rechristened Vodafone Ono, which lost 576 million.

Everything went against Ono last year, from a drop in sales and margins to the extraordinary negative results caused by the rise in the dollar.

Part of the losses can be attributed to decisions taken by the new management team, which decided to impose order on the company's balance sheet. Vodafone opted to cancel Ono's sizable debt and the repurchasing process has entailed paying significant early repayment fees.

The Vodafone Group has handed Cableuropa a subordinated loan of up to 3.8 billion, maturing in 2021 and pegged to the Euribor, in order to allow it to free itself of the expensive debt with which it was financing itself. The premiums and expenses paid out for canceling the various loans and debt issues have meant an outlay of 285 million.

Another key element has been the official Spanish Tax Agency reports identifying fiscal fraud relating to the deducting of VAT in the billing of certain suppliers, which has meant paying out 73.1 million in contributions, fines and other charges, plus a further 4.4 million in other taxes. The inspection also resulted in the termination of 30 million in tax credits.

Ono has also admitted clocking up 11.6 million in losses over the 2.6Ghz mobile spectrum licenses that it was forced to hand back as a result of a government ruling.

Further losses came as a result of a deterioration of fixed assets and replacing fiber optic cables and power equipment.

The company has also had to spend 77.6 million in order to make provisions for onerous rental contracts, litigation, an incentive plan for a small group of directors, and other risks.

As Cableuropa's debt was in US dollars it suffered negative exchange differences totaling 102.1 million in 2014 as a result of the rise in the currency. Nevertheless, the net effect was limited to 15.6 million thanks to coverage and agreed rates.

Ono's revenue fell 6.3% to 1.465 billion last year, above all because of a decline in the number of new customers it was able to lure away from other operators.

In April of this year, Vodafone sources revealed that the British multinational would be bringing a lawsuit against the former directors of Ono, due to their alleged mismanagement of the broadband company.

Vodafone announced the purchase of the company in 2014, as part of its growth plan in Spain based on an integrated cellphone and broadband package.

Recommended Reading :

* Vodafone Spain Ono merger to cost 1,200 jobs

* Vodafone Spain to remove permannce clause from Ono homes

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