case study vodafone

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Vodafone Case Analysis

Introduction

Vodafone’s journey in India has been a significant case in retrospective amendment made to tax laws. The decision made by the Supreme Court in this case and subsequently the decision made by PCA in Cairn UK case following Vodafone case amounts to a huge loss to the government as the reserve of the government depends upon the collection of tax. Tax avoidance has become a common practice today. Tax avoidance is considered as “legitimate tax planning”. Only after this case, strict provisions to govern tax evasion by non-resident companies through indirect transfers were made. Agreeing to the fact that there must be liberal tax policies in order to attract foreign investment, India need not stoop down too low to attract FDI. Moreover, tax laws in the country must be stabilized and strong tax laws must be enacted to cover these types of transactions in order to help the government. This case is a learning experience to know about indirect transfer of assets, taxability of capital gains, retrospective amendments to tax laws and clarity of tax laws in the country. Though various amendments to tax laws have been made, it has been a continuous defeat to the country regarding these offshore transfers.  This is a landmark judgment pronounced by the Supreme Court of India. It was a 3-judge bench decision consisting of Chief justice S.H Kapadia, Swatanter Kumar and K.S. Radha Krishnan. The case was originally dealt by the Bombay HC.

BOMBAY HIGH COURT

Vodafone India Services Pvt. Ltd vs Union Of India, Ministry Of Finance and Anr. EQUIVALENT CITATION: 2009(4) BomCR258, (2008)220CTR(Bom)649

Vodafone International Holdings (VIH), a Dutch Company procured 100% shares in CGP Investments (Holding) Ltd a company situated in Cayman Island, for USD 11.1 billion from Hutchison Telecommunications International Ltd in the year 2007. CGP, through different organizations and actions controlled 67% of Hutchison Essar Limited (HEL), an Indian Company. Vodafone got command over CGP and its downstream the subsidiaries including HEL through the acquisition. It had acquired telecom licenses to give cell communication in various circles in India starting from November 1994. In September 2007, a show-cause notice was given to the Vodafone Company by the Indian Tax Department to clarify the reason for why tax was not retained on instalments made to HTIL in connection to the above said transaction as said transaction of transfer of shares in CGP had an impact of aberrant or indirect transfer of assets in India. 3

Whether the transfer of shares between two foreign companies, resulting in extinguishment of controlling interest in the Indian Company held by a foreign company, amounted to transfer of capital assets in India and whether such transaction is chargeable to tax in India?

Sec 2(14) of Income Tax Act-Capital Asset

Sec 2(24) of Income Tax Act- Definition of Income Sec 5 of Income Tax Act-Scope of total income

Sec 9 of Income Tax Act- Income deemed to accrue or arise in India Sec 45 of Income Tax Act-Capital gains

Sec 191 of Income Tax Act-Direct Payment Sec 195 of Income Tax Act-Other sums

Sec 201 of Income Tax Act-Consequences of failure to deduct or pay

MAINTAINABILITY

The respondent contended that the writ petition is not maintainable because the petitioner had an effective alternative remedy available under Income Tax Act. 4 The petitioner cannot invoke the writ jurisdiction as there is a failure on part of the petitioner as they did not invoke the jurisdiction under tax law. It was held that where a statute creates a right or liability and gives a special remedy when enforced, the remedy provided by that statute only must be availed of. In the present case, the Act provides for a complete machinery to challenge an Order of assessment, therefor the order can only be challenged by the mode prescribed by the Act and not under Article 226 of the Constitution of India.

CONSTITUTIONAL VALIDITY

The respondent contended that the petitioner has not produced the important documents that are essential for determination of tax charges in India and thereby, the petitioner cannot challenge validity of provisions in issue. It was held that even if the burden of proof does not lie on a party, the Court may draw an adverse inference if he withholds important documents in his possession which can throw light on the facts at issue. 5 Therefore, when the Petitioner has challenged the constitutional validity of the Amendment to Sections 191 and 201 of the

I.T. Act by the Finance Act, 2008, then the same must be in context of certain facts pleaded and proved by evidence in the form of documents on record and not in vacuum or in the abstract.

Section 9 of the Act provides the formal source rule which provides for taxing gains that arise from the transfer of capital assets that are in India. In this case, Hutchison’s gain arose from the sale of shares of CGP, a capital asset located in Cayman Islands. Therefore Hutchison’s gain was not chargeable to tax in India; thereby, Vodafone BV in not required deducting tax at source under the Act.

Chapter X of the Act does not provide to tax all amounts involved in a particular transaction, which are otherwise not taxable. Before bringing any transaction for charging tax, a taxable income must arise. Therefore ordering to pay tax to amounts involved in International Transaction tantamount to imposing a penalty for entering into a transaction as no taxable income has been incurred.

It emphasized that the law restricted the courts from imposing tax liabilities on the basis of economic substance of the transaction. The legal form of the transaction was that Hutchison had transferred shares of a Cayman Island company. Since, the shares were situated in Cayman Islands, the “formal source rule” failed to capture the Hutchison gains in India’s tax net. To sum it up, Petitioner simply argued that it was not legally right to hold that Hutchison gains were taxable in India.

The issue of shares by the Vodafone to its holding company and receipt of consideration of the same is a capital receipt under the Act 6 . Capital receipts cannot be brought to tax unless specifically/ expressly brought to tax by the Act 7 . It is well settled that capital receipts do not come within the ambit of the word ‘Income’ under the Act, save when so expressly provided as in the case of Section 2 (24) (vi) of the Act. This brings capital gains chargeable under Section 45 of the Act, to tax within the meaning of the word ‘Income’. 8

In this case, attention was drawn to the definition of `Income’ 9 in the Act which includes in its scope amounts received arising or accruing within the provisions of section 56(2) (vii)(b) of the Act. The definition applies to issue of shares to a resident in India. This order relies on the meaning of International Transaction provided in Explanation (i) to Section 92B of the Act. It is submitted that Explanation (i) to Section 92B of the Act only states that capital financing transaction such as borrowing money and/or lending money to AE would be an International Transaction. However, what is brought to tax is not the quantum of amount lent and/or borrowed but the impact on Income due to such lending or borrowing. Similarly, Explanation to Section 92B of the Act, which covers business restructuring, would only have application if said restructuring/ reorganizing impacts income. If there is any impact of income on account of business restructuring/reorganizing, then such income would be subjected to tax as and when it arises whether in present or in future. 10 In this case, such a contingency does not arise as there is no impact on Income which would be chargeable to tax due to issue of shares. 11

The issue of Chapter X of the Act being applicable is no longer an untouched matter because similar provision as provided in Section 92 of the Act was also provided under Section 42(2) of the Income Tax Act, 1922. The Supreme Court held that the action of revenue in seeking to tax a resident in respect of profit which he would have normally made but did not make because of his close association with a non-resident. It observed that it is open to charge tax on notional profits and impose charge on the resident. 12 The aforesaid provision of Section 42(2) of the 1922 Act was incorporated in its new avtar as Section 92 of the said Act. It was thus emphasized that the legislative history supports the stand of the respondent-revenue that even in the absence of actual income, a notional income can be brought to tax. 13

Section 92(1) of the Act uses the word ‘Any income arising from an International Transaction’. Accordingly, we see that, the income of any party to the transaction could be subject matter to charge tax and it does not provide that the income of resident only is taxable. In case of Chapter X of the Act, the matter of real income concept has no applicability. Therefore, the difference between ALP and the contracted price would be added to the total Income.

Chapter X of the Act is a complete code by itself and not merely a machinery provision to compute the ALP 14 . Chapter X of the Act applies wherever the ALP is to be determined by the A.O 15 . The Petitioner itself had submitted to the jurisdiction of Chapter X of the Act by filing/submitting Form 3-CEB, declaring the ALP 16 . It is the hidden benefit in the transaction which is being charged to tax. Therefore, the charging section is inherent in Chapter X of the Act.

OBSERVATION

No express legislation on capital account transaction:

Section 92(1) of the Act states that an income from an international transaction is a condition precedent for the applicability of Chapter X. The meaning of income will not include capital receipts unless it is specifically mentioned as provided in Section 2(24)(vi) of the Act. So, capital gains to be taxed under Section 45 of the Act are deemed to be income under the Act.

Income pre requisite for applicability of Section 56(1):

For application of Section 56 of the Act , an income must arise which can be taxed. Issuing of shares at a premium is on capital account gives rise to no income.

Charge and measure of tax entirely different:

The tax can be charged only on income and in the absence of any income arising, the application of the measure of ALP to the transfer value does not arise. Chapter X of the Act provides that a transaction can be taxed only after working out the income after finding the ALP of a transaction.

No relevance of Section 92(2) in the present case:  

Section 92(2) of the Act deals with a situation where two or more AEs enter into an arrangement whereby they are to receive any benefit, service or facility. This provision is not applicable in this case as there is no situation where there is no allocation of any cost or expense between the petitioner and the holding company.

The transaction entered by the Petitioner amounts to transfer of a capital asset and not a transfer of controlling interest ipso facto in a corporate entity and is chargeable to tax in India.

It was held that any profit or gain arising from the transfer of a company in India has to be considered as a profit and gains of the company which actually owns and controls it. In this case, the income from the transfer is accrued by the HTIL and not Cayman Island Company (CGP). Therefore, the recipient was HTIL. Therefore the interest of the recipient is divested to the petitioner and hence is liable for capital gains tax.

The Effects Doctrine Extra-territorial operation of Section 195 of the I.T Act provides that any state may impose liabilities, even upon persons not within its territory, for conduct outside its borders that has consequences within the borders of its state. Hence, the dominant purpose of entering into agreement by the two foreign companies is to acquire the substantial interest and of which one foreign company is held in the Indian company the municipal laws of the country would be applicable and hence Indian Tax laws will be applied.

If the Hutchison gains were held not to be taxed in India, India would forfeit its right to tax as the country of source. Thereby the taxpayers will try to exploit the unintended loopholes in India’s tax law.

If the Hutchison gains were held taxable in India it would fortify India’s taxing rights as a source country- if you earn value from India, you shall be taxed in India. The entire value earned by HTIL “was only on account of the fruits of the investment made by HTIL in India, goodwill/brand value generated by HTIL for the Hutch brand in India, the telecom licenses granted in India, customer base in India and the prospect of future development and expansion in India 17 .” In the context of capital gains on company’s shares, the settled legal principle is that shares are located where the company’s share register is maintained, normally the place of its incorporation 18 . Rendering Hutchison gains taxable in India would entail imposing “substantial tax liabilities, after the fact, on entities that would avoid such liabilities according to this formal rule” 19 .

SUPREME COURT

Vodafone International Holdings … vs Union Of India & Anr

CITATION-[2012] 1 SCR 573

Whether the Indian Revenue Authority can tax a sale of shares between two non-resident companies on an offshore transaction where the controlling interest of an Indian corporation is purchased on the basis of that transaction?

PRINCIPLES DEALT BY SUPREME COURT

Piercing the corporate veil

Companies are separate legal entities that are independent from its shareholders and management. This is the foundation for company and tax laws. It is a general principle that a holding company is not liable for the acts of the subsidiary.

The Supreme Court held that it is the duty of the court to find the nature of the transaction and when doing it; it must look at the whole transaction and must not deal the elements of the transaction separately.

Considering the facts and circumstances of the transaction, the court must determine whether the transaction made primarily to evade taxes. It can be justified by piercing the corporate veil.

The Supreme Court held that strategic foreign direct investment (FDI) into India must be seen in a holistic manner.

By application of this doctrine, the Supreme Court held that the major purpose in Vodafone was to transfer the shares of CGP and not transferring the rights in HEL (situated in India). The court held that corporate can be pierced and the principal company can be held liable for the acts of the subsidiary company when it is shown that the company has misused to achieve certain wrongful objectives. 20

Tax avoidance and tax planning

The Supreme Court made a detailed difference between tax evasion and tax planning. The court held that tax planning is not illegal, illegitimate or impermissible. The debate over the validity and legality of the decision in Union of India v Azadi Bachao Andolan ((2004) 10 SCC 1)) and its departure from McDowell and Co Ltd v CTO ((1985) 3 SCC 230) on the specific issue of tax avoidance has been settled in this case.

The Court clarified that Justice Reddy’s observations extended only to artificial and colourable devices. Thereby it is wrongful to understand that mean all tax planning is illegal, illegitimate or impermissible.

Limitation Of Benefits clause.

Justice Radhakrishnan (in his concurring judgment) held that in case of absence of LOB clause in the Treaty, and in light of the existence of CBDT Circular No. 789 of 2000 and a TRC certificate, the Revenue cannot at the time of sale, disinvestment or exit from FDI in India, deny benefits to Mauritian companies by stating that the FDI was routed through a Mauritius company from somewhere else.

Tax Residency Certificate

In this case, the court held that the treaty and circular will not restrict the Revenue from denying Treaty benefits, when it is proven that the Mauritian company at the time of disposal of shares, made the transaction with intent to avoid tax. The court also referred to the memorandum of understanding (MOU) signed between India and Mauritius which is to track down transactions tainted by fraud and financial crimes. The court held that Mauritius is a clean jurisdiction to route investments into India and, provided the transaction is not found to illegal or colourable which was designed to evade tax.

Section 9 of the Act  

The Supreme Court explained that section 9(1)(i) gathers in one place various types of income that are deemed to accrue or arise in India. It includes: “All income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India”.

“The Supreme Court noted that the words “directly or indirectly” in section 9(1)(i) of the Act refer to the income and not the transfer of a capital asset (property). It held that to apply the words “directly or indirectly” to the transfer of a capital asset (such as HEL) “would amount to changing the content and ambit of section 9(1)(i). We cannot re-write section 9(1)(i). The legislature has not used the words indirect transfer in section 9(1)(i).” It noted that, “if the word indirect is read into Section 9(1)(i), it would render the express statutory requirement of the 4th sub-clause in section 9(1)(i) nugatory” 21

The court also made reference to the fact that the Direct Taxes Code Bill 2010 (DTC) proposes the taxation of offshore share transactions, which leads to the inference that indirect transfers are not presently covered by section 9(1)(i).

Transfer of HTIL’s property rights by extinguishment  

The court held that the case concerned the sale of shares and not the sale of assets. The court adopted the “look at” approach (as opposed to the “dissecting” approach) and held that the facts and circumstances of the present case must be viewed holistically. Hutchison has been part of Indian telecom business since 1994, and had been paying income tax in India.

Therefore, the transaction entered into cannot be considered sham or colourable. The court was of the view that the transaction took place only with intent to invest in India and not evade tax. The court also held that non-compete rights and the use of the Hutch brand were not property rights and it could not be subject to tax in India.

Withholding tax obligations: sections 195 and 163 of the Act

The transaction entered into by the companies is between two non-resident entities and was executed outside India. Consideration was also passed outside India. The court held that when a payment is made between two non-residents situated outside India, then the transaction has no nexus with the underlying assets in India. Therefore, Vodafone was not legally obliged to respond to the section 163 notice issued which declares a purchaser of an asset as a “representative assessee”.

The tax is levied on the basis of the source and the source is the location where the sale takes and not where the product is derived or purchased from.

HTIL and VIH are foreign companies and the sale takes place outside India, so the source of revenue is outside India. It could be taxable only when this trade is protected by legislation. The tax laws must be strictly construed and tax can be laid only when the language of the statute unambiguously states so. The provision for charging income tax must not be expanded to impose a tax burden which would otherwise be non-taxable. Therefore indirect movement of capital assents cannot be included by expansion of the provision. The present transaction was carried out between two non-resident persons in a contract conducted outside India where the consideration was also rendered outside India and VIH is therefore not legally obligated to respond to the notice referred to in section 163 relating to the purchaser’s care as a representative measure.

The selling of HTIL’s CGP shares to Vodafone or VIH amount to transfer of capital assets under the scope of Section 2(14) of the Income Tax Act and therefore not chargeable under capital gains tax on all rights and entitlements resulting from the shareholder agreement, etc., which form an integral part of CGP ‘s shares. The order of High Court of the demand of nearly Rs.12, 000 crores by way of capital gains tax would amount to imposing capital punishment for capital investment and it lacks authority of law and therefore is quashed.

GROUNDS ON WHICH THE ORDER CAN BE REVERSED

1. On bringing the retrospective amendment which states that any income which arises either directly or indirectly by means of or by reason of transfer of assets in India shall be deemed to accrue or arise in India and can be

2. The explanation inserted by finance Act 2012 to sec. 9(1)(1) in its 2 nd exception provides that CGP Investments is a 100 % subsidiary company of Hutchison company and is wholly controlled by the latter company. Therefore the exception provided in the explanation is not applicable and hence capital gain arising through sale is taxable at source.

The SC through its landmark judgment has removed certain uncertainties revolving around the imposition of taxes in the country. By means of this verdict certain principles have been established and recognized by the SC including:

• Principles relating to tax policies and plans
• The validity of tax avoidance by providing the taxpayers the right to reduce their liabilities to a maximum extent by legitimate arrangement of their income and business affairs provided nothing contrary to such act is specified in the enactments.
• The establishment of corporate structures by multinational companies for business and commercial purpose.
• The application of the principle of lifting of the corporate veil in all transactions done with an objective of evading taxes.
• Lastly the need for a holistic view or approach when dealing with cases involving companies having made investments in tax neutral countries. It further urges to avoid the misconception that presence of corporate structures in tax free countries is necessarily a scheme for avoiding tax.

In short, the SC through its judgment has distinguished tax avoidance from tax evasion and along with certain other significant principles recognized tax avoidance as a legitimate activity while penalizing tax evasion, further highlighting its view on the need for a legitimate tax planning.

CRITICISMS TO THE SC JUDGEMENT:

The judgment pronounced by the SC in this case has been to subject to severe criticisms. The SC is loathed for providing such a verdict. It is argued that SC has set a precedent that brings into jeopardy thousands of crores of potential revenue.it was also pointed out that tax avoidance through artificial devices is now a days very much prevalent in the industry and many large firms gain huge sums of money through such schemes. It was opined that the judgment in McDowell though reverted by 2 other decisions (Azadi Bachao Andholan and Wallfort) has dealt with the issue in the right perspective. The Mauritius companies are considered to be ‘post box companies’ and its remarked that the benign attitude of the tax authorities has led to a blatant evasion of taxes. The SC is blamed for not setting right the mistake it made by transgressing the McDowell judgment in the Vodafone verdict. The SC verdict is condemned on the basis that despite being aware of the transaction’s true nature as being transfer of Indian asset the SC has shown ignorant behaviour by providing such a verdict. This act of SC is viewed as a welcoming gesture for the foreign companies to evade taxes in India, jeopardizing crores and crores of potential revenue to the country and the attitude of courts towards such artificial tax evading devices. This judgment as a contract to the judgment in the 2G scam is considered to be arbitrary in nature.

CASES IN WHICH VODAFONE CASE HAS BEEN CITED

1. M/S Shri Vishnu Eatables (India) … vs Deputy Commissioner Of Income … on 3 October, 2016

“It is necessary for the Assessing Officer to decide the issue of objection to applicability of chapter X, if raised by the assessee, before referring the transaction to the TPO as it is a basic issue and would prevent loss of man hours on both sides in computing the ALP if it is finally concluded that Chapter X is not applicable.” 22 [3]

2. Income Tax Appellate Tribunal – Mumbai

Exind Trading P. Ltd, Mumbai vs Ito 6(2)(4), Mumbai on 7 November, 2019 It was held that the Vodafone case and CBDT Circular was not applicable in this case.

3. Income Tax Appellate Tribunal – Mumbai

Income Tax Officer-1(3) (2), … vs Singhal General Traders Private … on 24 February, 2020

“The premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment.” 23

4. Allahabad High Court

Rakesh Mahajan vs State Of U.P. And 4 Others on 4 December, 2019

“The legal relationship between a holding company and WOS is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary and, in law, the management of the business of the subsidiary also vests in its Board of Directors.” 24

5. Income Tax Appellate Tribunal – Delhi

M/S. New Delhi Television Ltd., … vs Dcit, New Delhi on 14 July, 2017

“If an actual controlling Non-Resident Enterprise (NRE) makes an indirect transfer through “abuse of organisation form/legal form and without reasonable business purpose” which results in tax avoidance or avoidance of withholding tax, then the Revenue may disregard the form of the arrangement or the impugned action through use of Non-Resident Holding Company, re-characterize the equity transfer according to its economic substance and impose  the tax on the actual controlling Non-Resident Enterprise.”25 [4]

INTERNATIONAL LAW AND VODAFONE CASE

The Permanent Court of Arbitration in The Hague, Netherlands, held that an amendment to Indian tax laws was in violation India and the Netherlands agreement.

The international arbitration proceeding was initiated by Vodafone International Holdings

B.V. (VIH or Vodafone) against the government of India regarding the retrospective amendment made to Indian tax

Permanent Court of Arbitration (PCA) held that the imposition of taxation through a retrospective amendment to domestic tax laws for imposition of tax, was in violation of “fair and equitable treatment” provided under the Agreement between the Republic of India (India) and the Kingdom of Netherlands (Netherlands). Moreover, any attempt to enforce tax demand on Vodafone would amount to breach of international obligations.

The objective of the agreement is for Promotion and Protection of Investments (India- Netherland BIT). This award does not mark the end of dispute as the Indian Government has the opportunity to challenge it before the High Court of Singapore.

The full text of the arbitration award is not in public domain. But it is known that the imposition of a tax liability based on a retrospective amendment is held to be breach of fair and equitable treatment laid down in Article 4(1) of the India-Netherland BIT.

Permanent Court of Arbitration at The Hague ruled that the demand made by India for Rs 22,100 crore by retrospective amendment as capital gains and withholding of imposition of tax for a 2007 deal on Vodafone Company was breaching the provision of agreement regarding fair and equitable treatment.

Recently, the Indian government has challenged the arbitration award in Singapore Court. The government is of the opinion that the matter of taxation is not covered under the treaty and taxation is a sovereign right of the country.

CAIRN’s DISPUTE

Cairn UK Holdings Limited, a company incorporated in the U.K. (Cairn UK), had a wholly- owned subsidiary, Cairn India Holdings Limited, a company incorporated in Jersey (Cairn Jersey). Cairn Jersey owned subsidiaries in India. In the year 2006, Cairn UK transferred its entire shareholding of Cairn Jersey to Cairn India. Subsequently, Cairn India acquired the entire business of the Cairn group in India.

In 2014, pursuant to a survey action carried out at the premises of Cairn India, the Indian income-tax authorities was of the view that the transfer of shareholding in Cairn Jersey had the effect of transferring the business in India and therefore, in view of the retrospective amended income-tax laws, Cairn UK was liable to pay capital gain tax in India. This action was challenged by Cairn UK and is currently sub-judice before the High Court of Delhi in India. While the proceedings were ongoing in India, Cairn group also initiated arbitration proceedings against the Indian Government under Article 9 of the Agreement between the Government of the Republic of India and the Government of Great Britain and Northern Ireland for Promotion and Protection of Investments (India-UK BIT).

BINDING FORCE OF VODAFONE CASE

The “Doctrine of Stare Decisis,” as prevalent in common law legal systems. It means “to abide by the precedents and not to disturb settled points.” There is no similar doctrine in civil law systems or under International Law. The International Centre for Settlement of Investment Disputes (ICSID) and the UN Commission on International Trade Law (UNCITRAL) provides that the award shall be final and binding upon the parties to the dispute. In absence of any prevalent rule of binding precedent of earlier awards, the international arbitration tribunals, functioning under ICSID and UNCITRAL, do consider previous awards to have a persuasive value.

Whether the Vodafone arbitral award would have any persuasive value in arbitration proceedings of Cairn UK would depend upon the factual matrix in both the cases.

Both cases involved indirect transfer of Indian assets prior to retrospective amendment in 2012 coming into effect.

Thereby the case was decided in favor of Cairn UK and it was not liable for capital gains tax.

CONSEQUENCE OF THE CASE

The government has got excessive flak for retaining India’s “retrospective” tax on asset transfers after it recently lost a case against Vodafone in an international arbitration court. Two broad critiques are important to note.

1. Governments should never make tax changes with retrospective

2. Tax laws must be stable in order to attract foreign (or even domestic) investment.

3. Vodafone must have been aware that asset transfers in India would attract capital gains By shifting the relevant jurisdiction to a tax haven, it seems to have got a lower price from Hutchison, a majority owner of the telecommunications company. Therefore, the objective appears to be a case of tax avoidance by using a grey area in Indian tax law.

Professionals have said that there is a need for clarity and certainty in tax laws to attract foreign investments. A liberal tax policy would attract Foreign Direct Investment into India. Some professionals say that the SC could have considered this issue and that is the reason why the decision is in favour of the foreign investor (Vodafone).

The arbitration tribunal also held that the terms of the agreement was not complied by India and it is established that India has contravened the provisions of the agreement. Therefore, the government must stop taking measures to recover tax from Vodafone.

AMENDMENTS IN TAX LAW RELATING TO VODAFONE CASE

In 2012, the government of India changed the Supreme Court’s decision by proposing an Amendment to the Finance Act, which gave the power to Income Tax Department to retrospectively tax such deals.

RETEROSPECTIVE TAXATION

Retrospective taxation gives the state a power to make a rule on taxing certain products, items or services and deals and levy tax on companies even before the date the Act was passed.

Most of the countries use this method to rectify any gaps in their taxation laws that existed and allowed companies to take advantage of such loopholes. Many countries have retrospectively charged tax on companies.

Retrospective amendments are generally given to taxation laws to “clarify” the previously existing laws. It ends up hindering companies which interpreted the rules, knowingly or unknowingly in a different way. These retrospective amendments had been criticised by various investors as, this type of change in laws would affect foreign fund flow into India.

In this case, the Parliament passed the amendment to the Finance Act in 2012, by retrospective effect and subsequently made Vodafone liable for tax payment. Thereby, this case was called ‘retrospective taxation case’.

EFFECT OF RETROSPECTIVE AMENDMENT:

The onus to pay taxes fell on Vodafone after the government enacted the retrospective amendments. This amendment was criticized by investors globally. The amendment was held to be a badly drafted law as it had affected to nullify the decision of the highest court of the Nation. Following such criticisms India tried to settle matters amicably with Vodafone but all its attempts faced failure.

Does the legislature have the right to declare any decision of the court of law to be void or of no effect?

In Shri Prithvi cotton mills limited and another v. Brouch Borough Municipality and others 6 1969(2) SCC 283 the court remarked that even if the legislature has competence it cannot merely pass a law to which the verdict of the court shall not bind as such an act is a tantamount to reversing the decision of the court by exercise of judicial power which the legislative authority does not possess. A court’s decision can only be altered when unless it is fundamentally incorrect.

In Cauvery water disputes Tribunal, a constitutional bench held that legislature is authorized to change the basis of the verdict and thus the law in general affecting a class of persons at large but the legislature cannot bring any laws overriding the court’s decision such that it affects the rights and liabilities of an individual person.

Similarly, in State of Tamil Nadu v. State of Kerala and another 9 (2014)12 SCC 696 the court held that as per the doctrine of separation of powers enriched in the constitution all the 3 organs are independent and thus a law can be set aside only when it breaches the principles of equality as enriched in the article 14 of the constitution. Further it declared that the HC and SC are empowered to determine the validity of any law of the legislature.

From the above decisions its clear that the legislature cannot bring into effect any law which overrides court’s verdict and affects the rights of an individual alone as in the landmark case of Vodafone. But it has the right to effect laws affecting a class of people in general.

As the Supreme Court decided in favor of Vodafone, subsequent amendments to the Act were brought in by the legislative authorities to reverse the judgment. The Act was amended such that it provides for the following:

INCOME THROUGH TRANSFER OF CAPITAL ASSET SITUATED IN INDIA: –

SECTION 9: it provides that the following income shall be deemed to accrue or arise in India:

All income arising directly or indirectly

• Through any business connection in India or
• From or through any property in India or
• Through any asset or source of Income in India or
• Through the transfer of capital asset situate in

The following explanations 4, 5, 6 and 7 was inserted through Finance Act 2012 to section 9(1)(1).

Explanation 4 : it clarifies that the word “through” shall mean and include and shall be deemed to have always included “by means of”, “in consequence of” or “by reason of”.

Explanation 5 : through this it is clarified that an asset or capital asset being shares or interest in a company or entity registered or incorporated outside India shall be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India.

But in order to make explanation 5 operational the Finance Act 2015 provided certain clarifications:

Explanation 6 : For the purpose of this clause, it is hereby declared that-

1. Substantial – any share or interest of a foreign company shall be deemed to derive its value substantially from the assets situated in India, if on specified date the value of Indian assets-

• Exceeds the amount of 10cr rupees; and
• Represents at least 50% of all the assets owned by the company or

2. Value of asset – the value of the asset shall be fair market value of such asset without reduction of liabilities, if any in respect of the

3. Specified date – it is the date on which the accounting period of the company or entity ends preceding the date of transfer. If on the other hand the book value as on date of transfer of the assets exceeds at least 15% of book value as on the last balance sheet date preceding the date of transfer, than instead of the date mentioned above the date shall be the specified date of valuation.

4. Mode of determining FMV: the fair market value will be determined as per the rules prescribed.

5. Taxation on proportional basis: the capital gains arising out of the transfer of shares of assets located outside India of any company registered outside India will be taxed proportionally as specified in the

Explanation 7 provides for certain exceptions; they are as follows:

Exemption in case foreign company or entity (whose share or interest get transferred) directly owns Indian assets

Exemption shall be available to the transferor of a share of, or interest in, a foreign entity if the transferor (along with its associated enterprises), at any time in the twelve months preceding the date of transfer,

a. Neither holds the right of control or management of such foreign company or entity;

b. Nor holds voting power or share capital or interest exceeding 5 per cent of the total voting power or total share capital of such foreign company or entity;

Exemption in case foreign company or entity (whose share or interest get transferred) indirectly owns Indian assets

 In case the transfer is of shares or interest in a foreign entity which does not hold the Indian assets directly then the exemption shall be available to the transferor if the transferor (along with its associated enterprises), at any time in the twelve months preceding the date of transfer-

a. Neither holds the right of management or control in relation to such foreign company or the entity

b. Nor holds any rights in such company which would entitle it to either exercise control or management of the company or entity that directly owns the assets situated in India or

c. Nor entitle it to voting power exceeding 5 percent of total voting power of the company or entity that directly owns the assets situated in India.

Impact of the explanations on the final verdict:

From explanation 4 added it can be deduced that any income which arises either directly or indirectly by means of or by reason of transfer of assets in India shall be deemed to accrue or arise in India and is taxable in the hands of Hutchison company, Hong Kong.

Similarly, explanation 5 brings within its scope the transfer of shares of CGP investments, Mauritius being a company incorporated outside India. It provides that the shares are situated in India as such and shares derive its substantial value from the business of a company located in India.

This way through such amendments the coverage of section 9(1)(1) has been increased retrospectively to include indirect transfers.

Impact of the exemptions given in Explanation 7:

As the Vodafone case revolves around indirect transfers the second exemption provided is of importance. From the second exemption it can be seen that to be relieved from tax burden in case of transfer of shares of a foreign entity, here which is shares of CGP Investments, Mauritius, which indirectly holds Indian assets the transferor or the seller in the given case being Hutchison, Hong Kong must not manage, control or hold any rights which may provide for such control over the foreign entity whose shares are being transferred i.e., CGP Investments.

But, CGP Investments being a 100 % subsidiary company of Hutchison, Hong Kong is completely controlled by the latter and thus, Hutchison does not come within the scope of this exception. Hence, any capital gain arising from sale of the shares of CGP Investments is taxable at source in its hands.

Thus, in a way it can be concluded that the amendments brought about through the finance act 2015 become rationally comprehensive in budget 2012. Thereby, through such amendments the coverage of section 9(1)(1) has been increased retrospectively to include indirect transfers to cancel the effect of the SC verdict.

SECTION 2(14) 0F THE INCOME TAX ACT

“ capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include:

(i) Any stock- in- trade, consumable stores or raw materials held for the purposes of his business or profession;

(ii) For personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

(iii) Agricultural land in India, not being land situate-

(iv) 6 per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;

(v) Special Bearer Bonds, 1991, issued by the Central Government;

(vi) Gold Deposit Bonds issued under the Gold deposit Scheme,1999.

Both the Bombay High Court and the Supreme Court held in this case that “controlling interest” is not a capital asset. The Finance Bill added the following Explanation:

The following explanation was added to the existing provision

Explanation: For the removal of doubts, it is hereby clarified that

1. ‘property’ includes and shall be deemed to have always included

2. Any rights in or in relation to an Indian company,

3. Including rights of management or control or any other rights whatsoever”

Therefore, as per the amendment , the rights of the Hutchison Hong Kong in Indian company shall be included in the term capital asset under section 2(14) including the right of management and control (i.e.,) right to appoint directors , right to access to hutch brand in India and non-competing agreement . Hence, in this case the capital asset in India has been transferred by Hong Kong to Vodafone.

SECTION 2(47) IN THE INCOME TAX ACT

Transfer”, in relation to a capital asset, includes, (i)the sale, exchange or relinquishment of the asset; or

(ii) the extinguishment of any rights therein; or

(iii) the compulsory acquisition thereof under any law; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock- in- trade of a business carried on by him, such conversion or treatment; or

(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of TOPA Act ; or

(viii) Any transaction (whether by way of becoming a member of, or acquiring shares in, a co- operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed always to have included,

• Disposing of or parting with an asset or any interest therein, or
• Creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily,
• By way of an agreement (whether entered into in India or outside India) or otherwise,
• Notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company incorporated outside India.”

Therefore, as per amendment, in this case, the transfer made by Hutchison Hong Kong to Vodafone is of the rights of Indian company including rights of management and control, as it has by transferring the shares of CGP Mauritius, disposed of or parted with the rights of the Indian company and through indirect means, created interest of Vodafone in Indian company. It has done this by way of agreement .Transfer of rights take place by way of transfer of shares by a company incorporated in Mauritius.

SECTION 195 OF THE INCOME TAX ACT- Other sums

(1) Any person responsible for paying to a non- resident, not being a company, or to a foreign company, any interest shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income- tax thereon at the rates in force.

Explanation 2 has been inserted in section 195(1) to clarify the obligation to comply with section 195(1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, residents, non-residents, whether or not the non- resident has: –

(i) A residence or place of business or business connection in India.

(ii) Any other presence in any manner whatsoever in India.

Therefore as per amendment, the presence of Vodafone establishment in India or the residence or place of business of Vodafone or its business connection in India is not necessary for deduction under section 195 but Vodafone had sufficient nexus in India.

Retrospective amendments are amendments which have backwards operation i.e., they come into effect from a past date. In India the finance minister has recognized the power to legislate retrospective laws and amendments. But the question as to the constitutional legitimacy of such amendments is a debatable question; though it is held valid in certain situations majorly it is held to be inconsistent. Thus, as a check on such amendments their use is restricted only to exceptional cases.Vodafone was considered to be one such exceptional case were the amendments introduced in Finance act 2012 were given effect from the past date. It was a revolutionary but a clever move made by the GOI to tax the Vodafone company which faced severe criticism from the global investors. The arbitration also held it to be violative of the India-Netherlands BIT.

The Senior advocate and architect behind Vodafone’s win Harish Salve opined his view on the retrospective amendments being a crusher of India’s image in the minds of the overseas investors and citizens. He criticized the instability shown by our government. He stated that the prosperity of the country depends upon the economic and political institutions of the country, on their stability and transparency.

Hence, though the government is granted the power to legislate laws and amendments with retrospective effect, its scope is restricted to exceptional cases and so before making any retro operative law consideration of its necessity, applicability and effects by the government is vital.

Vishnupriya. B | 4 th year B.B.A.LL. B(Hons) SASTRA Deemed to be University. Thirumalaisamudram | [email protected]

Abirami. A. B | 4 th year B.B.A LL. B (Hons) SASTRA Deemed to be University. Thirumalaisamudram | [email protected]

Nithya Parvathy.RG

Soundarya .A.

3 http://ramauniversityjournal.com/law/pdf_dec2019/03.pdf

4 Institute of Chartered Accountants of India v. L.K. Ratna & Ors (1986) 4 SCC 537

5 Krishnaji Ketkar vs Mahomed Haji Latif & Ors on 19 April,1968 AIR 1413, 1968 SCR (3) 862

6 Bombay High court Judgment para 14(f)

7 Cadell Weaving Mill Co. P. Ltd. vs Commissioner Of Income-Tax on 6 February, 2001

8 Section 45 Income Tax Act

9 Section 2(24) (xvi) Income tax Act

10 Bombay High court Judgment para 13(e)

11 Bombay High court Judgment para 16(i)

12 Mazagaon Dock Ltd. V. CIT [1988] 34 ITR 368

13 Taxation of notional income: a comparison of tax regimes-Manu Patra

14 Bombay High Court Judgment para 18(f)

15Bombay High Court Judgment para 6(g)3

16 Bombay High Court Judgment para 18(b)

17 Writ Petition No. 1325 of 2010, decision delivered on September 8, 2010 paragraph 54

18 Brassard v. Smith 39 (1925) AC 371 as quoted in paragraph 95 of the Judicial    Opinion

19 Weisbach, David A. 2002. “An Economic Analysis of Anti-Tax-Avoidance Doctrines”

20 United States v. Bestfoods [141 L Ed 2d 43: 524 US 51 (1998)]

21 Victory for Vodafone in Indian Supreme Court: the final conclusion or another twist in the tale? by Aditi Mukundan and Mansi Seth, Nishith Desai Associates

22 Judgment para 16

23 Judgment para 7

24 Judgment para 68

25 Judgment para 5.12

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Redefining Vodafone's customer experience with AWS

Moving the industry leader from telco to techco

3-MINUTE READ

A radical reframing

Today, telco customers have high standards—they expect service that matches the speed and flexibility of modern life. Recognizing this, industry leader Vodafone sought to transform from a “telco" to a “techco" that could provide a best-in-class digital experience to their customers and employees alike. To achieve this, they partnered with Accenture and AWS to become a cloud-based, digital-first company.

This involved a radical reframe of Vodafone's offering, positioning telco as an ongoing service. Now, as a cloud-native business, Vodafone can offer personalized customer experience wherever their customers need them, not just from a call center or high street shop. Their world-class technology team can develop and launch products more quickly. Most importantly, digital now constitutes nearly half of all Vodafone sales—an exciting shift that marks a new chapter for their business.

Four years ago, Vodafone released 21 products. Last year, this rose to 2,300 releases and Vodafone was rated #1 for customer experience in its industry.

Better experience for customers and engineers

Vodafone’s cloud transformation was a five-year process. Accenture helped Vodafone develop a comprehensive strategy for cloud migration, then implemented that strategy in close collaboration with  AWS.

Vodafone moved foundational services to AWS's cloud, embracing an agile, flexible model built on microservices. This allowed teams to develop new products and solve problems in parallel, dramatically reducing time-to-market. Vodafone was also able to modernize their network and replace outdated functions with accelerated cloud-native services. And to support these changes, Accenture helped Vodafone break down personnel silos and upskill their teams.

What does this mean in practice? For customers , it meant a smoother and faster experience. Historically, Vodafone customers had to call in or visit a store to get new products, change their service, or find answers to questions. Now, they can do all these things at any time from the comfort of their home.

For engineers , cloud architecture provided better tools and a much-improved work experience. Consider a Vodafone product launch. Before Vodafone's cloud migration, a team of 20 people worked 24 hours a day to ensure the company's IT infrastructure would hold up. Today, that same work can be done by five people. Engineers can identify and address problems much faster, so the entire organization can focus more on business outcomes. This has enabled leadership to eliminate redundancies, identify efficiencies and reduce costs.

Setting a new industry standard

Vodafone’s work with Accenture and AWS has already yielded impressive results for the company. Four years ago, Vodafone released 21 products. Last year, this was 2,300 releases and they are rated #1 for customer experience in their industry. They've increased their throughput by 250% and won eight industry awards during their digital transformation. Most importantly, customer satisfaction and employee morale are both soaring.

Increased throughput

in industry for customer experience

Vodafone Case Study

Introduction.

Vodafone Case study describes the situation when  Idea Cellular and Vodafone after the entrance of JIO. So, here is the Vodafone case study which describes the position of Vodafone and Idea Cellular before and post-merger, reasons for the merger, how did merger take place and critical analyses of the merger.

About Vodafone 

Vodafone company came from the UK based Vodafone Group plc. It is a multinational service provider of telecommunications in 22 different countries as of 20th November 2020. And, in India Vodafone has its headquarter in Mumbai, Maharashtra. Vodafone is the third largest telecommunication provider in the country. Vodafone

At the beginning of the year, 1992 Vodafone started its company in India from Bombay(now Mumbai). After the entry of JIO in the year 2016. Afterwards, our Vodafone case study begins, Vodafone and Idea announced their merger in March 2017. And as of 31st August 2018, it is known as Vodafone Idea Limited.

Vodafone Idea Merger Case Study

Vodafone case study explains the reason and the situation of the merger of Vodafone and Idea. This merger was first announced in March 2017. Afterwards, in July 2018, the department of telecommunication gave the approval for the merger. Finally, on 31st Aug 2018, the merger was completed and it is announced as Vodafone Idea Limited.

And this merger was the largest telecom merger in India. As per this merger, Vodafone holds a 45.2% stake, Aditya Birla Group holds 26% and the remaining stakes were held public. So, to understand the Vodafone case study, let’s understand the reasons for the Vodafone Idea merger case study.

Reasons For Vodafone Idea Merger

So, while understanding the Vodafone case study lets us understand the reason for the Vodafone Idea merger. 

• The main reason for the Vodafone-Idea merger is to Handel the rising dominance of Reliance Jio in the Telecom industry. As Jio announced to provide free services in the first 6 months. As a result, it started to capture the maximum part of the market.
• Secondly, the free services from the Jio started the price war between the companies in the telecom sector( as it in an oligopoly market structure ).
•  As a result in case of a price war merger brings confidence in companies with synergy benefits. 
• At last, the combined entity of Vodafone and Idea was expected to hold a strong position in the industry . Such as in some circles it became the largest cellular service provider and in some circle, it was the second-largest after Bharti Airtel. So, a joined company can focus on being the service provider in pan India.

So, these were the reasons in Vodafone case study for the merger of Vodafone and Idea.

Vodafone Idea Integration

According to the past in the telecom industry, major telephone operators believes the merger is a strong tool to be in the lead position. As Airtel acquires the Telenor, it acquires the scope and business from other small telecommunication companies like Augere Wireless, Videcon, Tikona(4G Spectrum) etc. 

Also, Reliance Communication (R Com) merged with Aircel and acquire MTC. Plus the Tata Telecom also started the process of merging with R Com. As a result in a period of seven months telephone operators numbers went down to seven from twelve.

However, the announcement of the merger creates a negative image in the public, when the Vodafone and Idea merger was announced the Idea prices started to drop . And the share price of Idea declines from Rs. 97.70 on 20th March 2017 to Rs. 81.81 on 6th Sep 2017.

But the merger was important it gave support to the two companies, which were struggling to survive in the industry. Combined resources will help to compete with only the two biggest brands(Jio and Airtel).

So, these were the challenges of Vodafone and Idea merger in case of Vodafone case study.

Critical Analysis Of Vodafone Case

The merger of Vodafone and Idea in Vodafone case study gave higher stakes to the Idea promoters as compared to Vodafone. So, in long run, both companies can gain access to equal shares in the future. 

Here are the few takeaways from the Vodafone Idea merger in Vodafone case study: 

• The very first thing was the acquisition of 4.9 per cent shares of Vodafone by Aditya Birla . This would amount to a total of Rs. 3874 crore wherein each share is worth Rs. 108 . This would be helpful in increasing the shareholding capacity of Idea to 26 per cent .
• While in the case of Vodafone case study, Vodafone holds 45.1 per cent of the shares in the merger, Idea would be allowed to buy another 9.6 per cent but at a cost of Rs. 130 per share in the period spread over the next four years. However, if Idea is unable to come up equal to the shareholding percentage of Vodafone, it can go forward and buy the number of shares required further but at the price prevailing in the market.
• And, the chairperson of the newly formed enterprise would be Kumar Mangalam Birla . On the other hand, Vodafone had appointed the Chief financial officer . As, after that new CEO was named under both the companies.
• Lastly, the promotors of both entities have the right to nominate three members for the board . Also, there are 12 members out of which 6 are independent on the board in the Vodafone case study of Vodafone and Idea merger. 

Idea Positioning Before Merger

In Vodafone case study of Vodafone and Idea merger, now lets understand the Idea Cellular Limited is an Aditya Birla Group company. Founded in 1995, the company was incorporated as Birla Communications Limited and had a license of GSM-based services in Gujarat and Maharashtra Circle. In the following years, the organization started to expand its business with Tata Group, Birla and AT&T group of the US in joint venture form. 

In August 2015, Idea announced the rollout of its 4G services. It was now competing with Airtel and Vodafone – in a non-monopolistic market. The company relaunched its “What an Idea” campaign taking 4G to the rural areas and empowering people through the usage of 4G services.

But in the year 2016 sudden announcement from Mukesh Ambani about Reliance Jio disrupted the Indian telecom sector. Below pie chart shows the market share of different telecom players before the entry of Jio.

As the Indian market is very sensitive towards price and Jio used it to make most of the profits. So, Jio started to make its all services free for the first six months. Afterwards, they made the services of voice calls, data extremely cheap. As a result, JIO captured a significant share of the telecom industry. Here is the pie chart of the post-Jio market share of various telecom players.

Vodafone Idea Merger

This transaction required various approvals from government authorities including SEBI, dept. of Telecom and Reserve Bank of India among others. The Department of Telecommunications (DoT) has given the green signal for the merger of Vodafone India and Idea in our Vodafone case study, the largest Merger and Acquisition agreement in the sector, which has displaced Bharti Airtel from top position after over 15 years. The approval conditions, which were given over a year after the agreement, were announced in March 2017 which included an advance payment of Rs 7,268 crore. 

Idea Contributon

Promoters Aditya Birla Group infused Rs 3,250 crore in Idea Cellular , which separately raised Rs 3,000 crore ahead of a planned merger with Vodafone India. Following the equity infusion by Idea’s promoters, their stake in India’s third-largest telecom operator rose to 47.2% from 42.4% now. Idea contributed its assets which included standalone towers with 15,400 tenancies and a stake in Indus towers Ltd of 11.5%. 

The entry of Reliance Jio Infocomm Ltd in September 2016, with free services for almost seven months and cheap tariffs, had eroded margins and impacted the revenue of rivals. The contribution of Vodafone will be Vodafone India along with standalone towers with 15,400 tenancies without including an 11.5% stake in Indus Towers. According to the agreement between Idea and Vodafone.

Vodafone will contribute more amount of net debt, about Rs 2,480 crore than Idea at the completion of the merger. Post-termination of both companies, the combined entity will be a joint venture between Vodafone and Idea in the Vodafone case study. Which will account for the under the equity method, controlled by both Aditya Birla Group and Vodafone.

Idea promoters hold the rights to acquire a 9.5% additional stake from Vodafone under the agreed deal to equalize shareholdings over time as per the following proposition

Vodafone: 45.1% – 9.5% = 35.6%

Idea: 26% + 9.5% = 35.6%

Impact of Merger on Telecom Industry

There are also several other implications that this merger of Vodafone case study will bring forth on the telecom industry.

1. Firstly, there can be initiatives based on the renewal of price discipline for the disruptive entry by Jio has caused some serious misbalance

2. Secondly, the poor financial health of the telecom sector can be observed. And through such mergers, there will be an infusion of health and life. Since India is the fastest-growing market in terms of subscriber base .

3. Through the merger, Vodafone and Idea will overcome their debts and a large sum of credit will be infused into the system

4. The deal has also saved both the telecom companies from selling off their business . As was being planned by them initially and this would directly impact the quality of services being provided by different players in the industry

The merger in the Vodafone case study will surely boost the pace of the telecom sector. It has also been found that the savings, synergies and also the spectrum will have a substantial impact on the escalating growth. 

There will be a saving of over 60 per cent of the cost of the operation and this will aid in improving the quality and performance of the service through investments from the saved money.

Enhancement in network infrastructure will be observed while the operational efficiencies have a chance to reach excellence. Moreover, the revenue market share is expected to rise for all the locations and the spectrum of the entity would exceed the initial caps.

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Vodafone’s Innovative Approach to Advanced Technologies

Harvard Business School professor Bill Kerr discusses how Vodafone, one of the largest companies in the telecommunications space, incorporated technological advancements like big...

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Harvard Business School professor Bill Kerr discusses how Vodafone, one of the largest companies in the telecommunications space, incorporated technological advancements like big data, automation, and artificial intelligence to improve productivity while ensuring new opportunities were created for the next generation of workers. Kerr is the author of the case study, “Vodafone: Managing Advanced Technologies and Artificial Intelligence.”

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Vodafone: Building a global organization

Vodafone, the world’s largest mobile telephone network operator, was one of the great growth stories of the 1990s. Founded in the early 1980s, Vodafone first built a strong base in the UK, and then expanded abroad in the late 1980s and early 1990s. By 2000, Vodafone had the largest network in the world and shifted its attention to a new priority: creating an effective global organization that would capture synergies in revenue growth, cost reduction, and capital expenditures. The challenge would not be easy. Most of Vodafone’s operating companies had their own brand names, distinct channel strategies, and local product strategies. Exactly how to design and manage the new organization was not clear.

This integrative case begins with a discussion of industry forces and company strategy, and then examines the process of designing a global organization. Next, it focuses on global branding, which involves not just setting a brand strategy and migrating local brands, but also executing a global campaign of communications and sponsorships.

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Vodafone’s Innovative Approach to Advanced Technologies

Brian Kenny: AI. Artificial intelligence. It's the plot line for generations of sci-fi thrillers and blockbuster movies, replete with jaw-dropping special effects and visions of dystopian futures, where things rarely end well for the humans. Then along came the movie, Her , in 2013, a sci-fi romantic comedy, where the lead character falls in love with Samantha, a hyper-intelligent computer operating system with accelerated learning capabilities, personified in a Siri-like female voice. Romance blossoms. Our love of gadgets taken to absurd new heights.

Of course, in reality, our day-to-day encounters with artificial intelligence are far more mundane. In fact, they may even go unnoticed. But many believe that AI holds the promise to improve our lives in ways large and small. Icons of tech and science communities, including Bill Gates, Stephen Hawking, and Elon Musk warn that with that promise comes peril. Seize the promise; avoid the peril: therein lies the challenge for business leaders.

Today we'll hear from Professor William Kerr about his case study entitled Vodafone: Managing Advanced Technologies and Artificial Intelligence . I'm your host, Brian Kenny, and you're listening to Cold Call.

Bill Kerr's research centers on how companies and economies explore new opportunities and generate growth. His forthcoming book, The Gift of Global Talent: How Migration Shapes Business, Economy, and Society , explores the global race for talent, and how countries and businesses compete for high-skilled immigrants. He's also the co-director of Harvard Business School's Managing the Future of Work project , which explores the unprecedented set of challenges and opportunities presented to business leaders today, including aging workforces, growing skills gaps, shifting labor markets, and, of course, rapid technological change, which is exactly what we're going to talk about today. Bill, thanks for joining me.

Bill Kerr: Thank you for having me.

Kenny: Consumers don't realize all the ways that artificial intelligence is already impacting their lives. This case really brought it home for me as I learned about what Vodafone was doing. Maybe you could start just by setting up the case for us. Who's the protagonist? What's on his mind?

Kerr: The case is set in January 2018. It is a gray day in London. The central protagonist is Vittorio Colao, the CEO of Vodafone, but I think of the case more as a conversation with Colao and members of his top management team about advanced technology, and artificial intelligence, and where they are.

Unlike your introduction and the romance that may come with AI, their questions were much more mundane. "Are we going at the right speed? Have we figured out the right strategy for the future? Where is all this taking us, and are we prepared?"

Unlike a number of cases where there is that famous trigger event--the person that walks in the room, or the call from the customer--there's no trigger event in this case. It's really in the midst of this rapid change, as you described, their assessment of, "Are we on the right pace, the right track? And what do we need to do for the future?"

Kenny: They're sort of a proxy of how many other organizations are starting to think about this. I mentioned that you're the co-leader of the Managing the Future of Work project here. I would imagine your motivation for writing this case ties back to that project?

Kerr: Absolutely. Managing the Future of Work has been a project we set up over the last two years at the School to both think about technology and demographic trends, and how they are reshaping the workplace. We see a lot of conversation about the future of work--we all get the emails that come in about the scary or the very promising futures of work that we may hold. What we're trying to do is have a place that deliberately inserts the word "managing" in front of it, so managing the future of work. How are leading companies and leading policymakers thinking about how to shape this future, and the role of their company in that?

Kenny: It sounds like they really opened up too, because the case has a lot of detail in it. So, why don't we dig into it a little bit. There were some things that you, right up front, talk about that were occupying Vittorio's mind. Can you walk through those?

Kerr: Sure. The case throughout has at the core three levels of conversation or thought going on. One of these is just very operational. Like, when we install a chatbot, what is the impact that it's having on our business? How many employees does this sort of replace?

Kenny: What's a chatbot? Just so our listeners know.

Kerr: This would be a customer service request. You come online [and] rather than speaking directly to an employee, you're talking to, first, a machine that's trying to handle some of your questions. And then, if it gets frustrating, we hand you over to a customer service agent. And as we'll describe later on, they have internal operations that they're doing with things like this. So, one level is just very operational. From the HR department over to customer service, to network ops, what are the things we are doing, and how can we make sure that we’re getting the most out of these opportunities?

The next level up is at a leadership-management level. It’s Vittorio and his team thinking about how the way they used to manage this company is different than what's required today. In the past, marketing was a function that was largely driven off of instinct, or people's accumulated experience over time. Now, data plays a much more central role. They have to think about how they change the functions and the operations, and how they adapt to this environment.

The highest level goes back to your introduction about dystopian concerns and similar, which is, "Where is all of this going?" and, "What's going to be the impact for society?" If you're a company of Vodafone's size, you're clearly thinking about the broader societal implications, and how you need to be playing an important and active role in shaping that future.

Kenny: How big is Vodafone? They're a European-based company. Where do they sit in the landscape of the telecom space?

Kerr: Vodafone is headquartered in London. They have operations in about 30 countries. It's a little bit less than that, but the exact number, I think, is hard sometimes for me to perfectly pin down. Somewhere between 25 and 30 countries. They have over 100,000 employees across these organizations. They are one of the top five, in terms of size, mobile providers in the world. Many people that listen to this podcast will be a Vodafone customer because there's about 500 million of them in the world. And like all telecom operators, they're not just in the mobile space, but they're moving into converged applications for consumers, internet of things, enterprise operations, and similar.

One of the distinguishing things that quickly bubbles up in the case about Vodafone's operations is that each of these countries has autonomy for the things they're doing. [This is] one of the starting points for Vittorio's management style. He said, "I ban the word 'global' inside Vodafone. Instead ... we are an international company, but we respect how each country has a unique heritage, unique regulations. Don’t think of this as … providing the same service in 28 different countries but instead, ‘We are providing the localized service as appropriate.'"

Kenny: There are some great statistics in the case about the global telecom market, just the appetite for data these days, and the way that the industry has changed. And Vodafone is trying to stay on the leading edge of that.

Kerr: And it's a hard leading-edge to stay on. I actually began my career in the 1990s in the telecom space. Back then, there was often a monopoly or duopoly. Things moved rather slowly. There was some technological change, but it wasn't something that really would necessarily keep a CEO up late at night. Fast forward over the last couple of decades, and there's very rapid technological shifts. You have lots of deregulation, and the market has allowed for more competition. You have people coming in from the side, like a Skype or even a FaceTime. It's a space that you have to be able to move very quickly in order to be a part of it.

Kenny: What are some of the key areas that are affecting the digital transformation…?

Kerr: If you think about this broader digital transformation, there's a bunch of different ways one can slice this. You can think of it in terms of data analysis, moving into automation, or robotic process automation, RPA, the kind of chatbots and things that we talked about before, or go out to that exotic of artificial intelligence.

Another way you can think about the transformation companies have to go through is they, at some level, are thinking about, "How does this affect my just day-to-day operations?" But also, "What new risks am I exposed to?" or, "Who could come in, and just disrupt me from the outside in a digital format?"

Throughout the case you hear this conversation at a number of points, where Vittorio, even though he has 100,000 employees, at one point says, "Gosh. I stay up late at night sometimes, worrying about, 'Could a 100-person startup company with the right software, running it over my lines, and my sort of infrastructure, just displace the things that I'm doing?'"

So, at times, when you think about digital transformation, it's hard to pin down exactly where in this landscape you're talking about. You need to make sure you're covering all of it, and you're being clear what you're pulling up for analysis at a point in time…

Kenny: So, that gets right to the topic that you talk about in the case, how they manage innovation. They've got some pretty interesting ways that they go about managing innovation across this enormous organization.

Kerr: Let me set the case with a little bit of context. Clearly, if you're a telecom provider of Vodafone's size, you have a technology roadmap for a five-year horizon that's going to include a thousand different things, everything from, "What's the next generation of cell phone towers?" over to the types of things that we're talking about, which is how they put some of these new automated and advanced technologies into the organization. But much of the conversation sits around the tools they utilize, especially with their multi-country setting. How can they use themselves as a vehicle for challenging themselves, getting in front of stuff?

One example is that they have a strategy they call crawl-walk-run, where they [start] in one country with a new technology, trying to learn about it. Then, they move to a limited deployment across three or four. And then, they try to take it out to the 25, 28 countries globally. It's a step-by-step process, where they're understanding before they try to take it large-scale.

Likewise, at many points, you see them testing things on themselves. They began their bot development process first with their internal IT help desk. So, a way for them to learn about what's going to frustrate the heck out of people, and "how can we do it on ourselves before we actually put this in front of live customers, and counter them?"

“Amelia” was the internal IT help desk bot that began this process as a way for them to try to handle as many internal requests as they could. Vodafone, like many large multicountry settings, has a shared services division that would be answering a lot of these requests. TOBi is the one that came out that's more of their customer-facing operation. This is when you go online, pull up the, "I need help on this." You start talking with somebody. It's going [to be with] TOBi, and it's not going to be a customer service agent at the front. As of January 2018, about 70 percent of all customer requests were being handled by TOBi.

Kenny: TOBi is not a person on the other end who's responding…

Kerr: TOBi is not. That was an important question that they had to think through: Do we want it to be obvious to the customer that you're talking to a computer, or do we want it to be kind of a little fuzzy, or a little vague? Companies have taken different routes here. In this case it's very clear that TOBi is a computer you're talking with. As they get a sense that you are frustrated, it kicks you over…

Kenny: If people swear at TOBi, you know it's time to move 'em along.

Kerr: Exactly. And throughout, they keep a constant stream of the conversation and what has happened both for continuity at the handover, but also because that's how they learn. It's how they can train TOBi to do better next time with this type of request.

The heart of it is you have to train these programs. It's not that there is a single list of actions. In some settings you're interacting with customers, there's a whole range of things…

Kenny: And sentiment, all those other things.

Kerr: Right, exactly. So, when you go to the question of, "How do I attract young digital talent when I'm automating?" This is something that young digital talent are looking for. They want to have the ability to work with very advanced technologies, and just because you're automating something doesn't mean there's not an important role for a person to play in this process.

In fact, we often think that you have to move your game to a higher level. So, you used to be crunching some data. Now, it's likely that the machine's going to crunch that data better than you. You're going to have to understand which data you should be putting into the machine and understand the overall risk patterns that that data is producing. Those are tasks that young digital people are going to find exciting and want to be a part of.

Now, [Vodafone] has to make sure that they can compete against the Apples and the Googles of the world for talent … This is the age-old question for companies all around the world bringing in digital talent: How do you do that effectively? Of course, a lot of that is the workplace environment, making it an exciting place to operate, power and autonomy that people feel in their work, being able to see the impact on the results of the products they're creating. A lot of these things are common to many companies as they compete for this workforce.

Kenny: You mentioned early on the three levels, and we've talked about the first two as they thought about moving down this path. How have they thought about that third level of society and the implications for what they're doing?

Kerr: I believe that they were remarkably open and helpful in this case-development process to describe it. They did not shy away from talking, at times, about the economics of some of the stuff they're doing. They're very clear that with a number of the bots they roll out, it usually takes the place of three employees, and they can provide the cost structure of say, 6,000 Euros a year to run the bot effectively. And there is some question about, "What if it's not three jobs anymore? What if it's 3,000 jobs?"

But they then packaged this up, and, "What are the many things we need to consider? First off, we have to move extremely fast, and be competitive in this market because what matters in the end for customers are prices. And this is a way for us to be ever more productive with our workforce, and the overall size of Vodafone may grow to the degree that we can do this." So, to date, even though there's places where they have shed some employment around some of these advanced technologies, the company hasn't shrunk in its overall size; its employment base has grown.

But then, you come to some of the more difficult questions of, "Well, we look out, and that's going to have some important implications for our operations in various countries. Even if Vodafone’s employment as a whole is increasing, it could be that we're reducing employment in some markets, or in some operations. And that could have an important local effect, destabilized local effect." They want to make sure they're thoughtful and respectful as they roll out these types of improvements and technologies, that they don't disrupt the landscape in the countries that they operate.

At some level that is just being a good citizen. It's also ... when you are a company of Vodafone's size, you're directly interacting with the president of most countries that they are working in. And there's going to be expectations about, you know, "What are you doing around these operations?" or, "What's going to be the road map of the future for Vodafone in this place?" That's a conversation that they need to manage.

Kenny: It reminds me a little bit of the change that we had to go through when assembly lines became a very common thing, and automation happening in assembly lines that was changing the nature of jobs that people had, but the industry adjusts over time.

Kerr: Yes. And much of the case is about how the leadership team is trying to educate themselves, and also the workforce, to make these adjustments happen. And then in places where they know that it's going to be different, how should they prepare for that opportunity, an example of where they know it's going to be different?

Kenny: So, you've had the opportunity to discuss this in the MBA class. How do they respond? The emerging leaders of the future?

Kerr: For them the case really resonates, in part, because this is what a lot of them are going to face. Organizations like Vodafone have built up [with] 40, 50 years of history. Legacy systems. Customer bases, and their expectations, and so forth. You can't just jump to whatever the latest technology is overnight. You have to build the workforce that can handle that. You have to manage your existing IT spend in order to get there. You have to manage capital markets. They need to understand and walk through, "How does this process unfold?" and, "If you're put in a leadership position like Vittorio what's the step that you need to go through to make this happen?"

Kenny: Great insights, and great things for our students to be thinking about, and managers everywhere. Bill, thanks so much for joining us today.

Kerr: Thank you.

Kenny: If you enjoyed this episode of Cold Call, you should check out our other podcasts. After Hours features Harvard Business School faculty dishing on the latest happenings at the crossroads of business and culture. Managing the Future of Work features experts discussing how to survive and thrive in the age of artificial intelligence and learning machines. Subscribe to these and others on Apple podcasts or wherever you listen. I'm your host Brian Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School.

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How Vodafone successfully rolled out our custom digital marketing program

“I had the greatest degree of confidence in the Digital Marketing Institute, both in terms of quality of content and their global certification standard, which we could apply across all of our markets,”

Mohsin Ghafoor Global and Commercial Learning and Development, Vodafone

Vodafone UK is a provider of telecommunications services in the United Kingdom, and a part of the Vodafone Group, the world’s second-largest mobile phone company.

As a global player in the telecoms industry, Vodafone’s reputation thrives on their ability to innovate and adapt to market trends. To that end, the Marketing Academy in Vodafone was seeking a relevant, in-depth and effective professional education course to sharpen the digital skills of their workforce.

The Challenge

As Head of Global and Commercial Learning and Development at Vodafone, Mohsin Ghafoor’s task was to raise standards in digital marketing, across the group. “Our aim was that every marketer at Vodafone reaches what we would describe as a minimum acceptable standard of digital marketing skills, knowledge, and capability, and be able to apply that to their day job and have an impact on our customers.” But not only does Vodafone have a very large workforce, it is also spread all over the world. Natasha Brookes is a Learning and Development Specialist at Vodafone. For her, it was clear that a digital marketing course needed an online solution. “Vodafone is a large global organization. In order to reach all of the marketers within the different markets, what better way to do it than having one place where marketers can come and learn? And it will be a consistent learning approach.”

The Solution

The Digital Marketing Institute realized early on that Vodafone is a company that wants to set the pace, not just keep up with it. They didn’t just want a foundation to their digital marketing, they also wanted to train their staff to be up-to-date and current in their knowledge and skills, so they could anticipate what their customers would want. “I had the greatest degree of confidence in the Digital Marketing Institute, both in terms of quality of content and their global certification standard, which we could apply across all of our markets,” stated Ghafoor Fortunately, the Vodafone Marketing Academy had a learning management system, or e-learning system, already set up. Having a learning management system meant that their staff already knew the benefits of learning online. The next step was to find the right partner, to provide the content the company needed. To get Vodafone started, The Digital Marketing Institute began by carefully picking topics and courses that were most relevant to Vodafone and their staff. They then agreed a global user license that gave Vodafone’s staff access to 15 of the DMI modules. Their staff could choose from modules in both the Professional Diploma in Digital Marketing and from the Specialist Diplomas.

The Results

The Digital Marketing Institute team then worked with Vodafone to integrate core modules and content into their e-learning system to make it easy for their global workforce to train together, wherever they were, and whenever it suited. The video-based learning content is now used by Vodafone Marketing Academy staff all over the world. A launch was also successfully supported by with a range of creative promotions – from e-flyers to newsletters and helped generate awareness and enthusiasm for the courses through internal campaigns. Today, The Digital Marketing Institute continues to work with Vodafone to certify their workforce, and help the company realize their full digital potential. “I found the relationship to be a really positive one. One that was constructive. It certainly felt to me that what I was saying about Vodafone’s needs and requirements in this space was being listened to,” concluded Mohsin.

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Vodafone Idea Limited is an Aditya Birla Group and Vodafone Group partnership. It is India's leading telecom service provider with over 408 million customers and revenue market share of 32.2% (Q1FY19). With a large spectrum portfolio and number of broadband carrie​rs to support the growing demand for data and voice, the company is committed to deliver delightful experiences to customers and contribute towards creating a truly 'Digital India' by enabling millions of citizens to connect and build a better tomorrow.

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Vodafone India had a manual, labor-intensive process for determining network capabilities and reach. The company sent field operatives to every customer location to conduct a feasibility study. These feasibility studies help Vodafone determine whether they can provide connectivity and services to customers based on the infrastructure at that location. Everyone from the IT team and end users to the field operatives doing the work recognized the need to adopt a new solution to automate the measurements. They needed a technology that was easy to use and maintain.

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• Employees are able to access information faster with SmartFeasibility—they have data at their fingertips, rather than waiting for an employee to collect it
• Field operatives have increased their conversion rates by providing more accurate readings on feasibilities and closing more customer business
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15x increase in capacity thanks to Maps-based web app

"Vodafone used to manually perform physical surveys for each feasibility, which is a time-consuming and labor-intensive process. Often, feasibility studies were delayed, and we missed out on opportunities to serve additional customers. With SmartFeasibility, we've increased our capacity 15 fold, which positively impacts our bottom line and allows us to provide better and smarter customer service."

Partnering with Lepton Software (a leading global provider of location-based analytics solution) Vodafone introduced SmartFeasibility—a solution that changed the feasibility testing from a manual to an automated process. This involved a full Google geo platform solution – leveraging world class technology like maps, roads and directions. With the new solution, Vodafone India no longer needs field operatives to manually calculate these measurements. With Google Maps, users can search customers' addresses, calculate the distance between Vodafone's location and the customer's location and research building data such as height. The old system of having field operatives collect data was unreliable. With Google Maps Platform, the Vodafone India team knows that the measurements are accurate and reliable.

Vodafone Tax Saga explained

In today's Finshots, we talk about the latest ruling on the Vodafone Tax matter and explain the whole case in as few words as possible.

So hold tight. This one is going to get bumpy!!!

The case begins with Hutchison Telecommunications International Limited. We’ll keep it short and just call this company HTIL. Based in the Cayman Islands, HTIL was a telecommunication giant providing mobile and internet services in countries like Indonesia, Sri Lanka and India. And although this company was the original brainchild, they did not explicitly intervene in matters. Instead, they used buffers. Buffers like CGP Investments Limited.

CGP Investments was another company based in the Cayman Islands but fully owned by HTIL. And CGP had made some big investments, at least on paper. The company owned shares in several Mauritius-based entities who in turn owned stake in certain Indian companies and ultimately held a 67 % stake in Hutchison Essar Ltd. — a joint venture between Hutch and Essar and one of the leading players in the Indian telecom industry.

So technically Hutch (HTIL) was managing its India operations through a web of companies based in Mauritius and the Cayman Islands. Until one day they finally decided to exit the country altogether. They were looking for a buyer and the Dutch-based — Vodafone International Holdings answered the call. They paid $11.1 billion to HTIL and acquired CGP Investments in a bid to take control of Hutchison’s India operations. Hutch Essar became Vodafone Essar. And that should have been that. But then…

The taxman cried foul.

In September 2007, India’s tax department initiated proceedings against Vodafone International Holdings and Vodafone Essar in an attempt to recover around $2.1 billion in taxes. Their contention was simple. This transaction, by all accounts, involved the sale of Indian assets and as such any gains made in the process should have been taxed here, in India. But Vodafone disagreed with this assessment. After all, HTIL sold a Cayman-based company — CGP Investments, to a Dutch based company — Vodafone International Holdings. How on earth could you tax a transaction that involves the sale of a foreign company to a foreign entity? It’s preposterous.

But since tax authorities weren’t relenting, Vodafone approached the Bombay High Court seeking refuge. But the court…

Well, they saw things differently. For starters, it was quite apparent that CGP did not have an independent existence. Hell, it did not even have a bank account. So really, any entity that’s buying CGP isn’t actually interested in the shares of CGP, but all the things that come with it. And to this effect, the court argued that the sale of CGP Investments was not adequate in itself to achieve the object of consummating the transaction. The transaction was only complete when all the rights and entitlements of Hutchison’s Indian assets were transferred. And as such, the tax authorities had every right to purse Vodafone, it said.

Vodafone however, did not relent. The company approached the Supreme Court where the discussion largely revolved around one subject— Was this a deliberate case of tax avoidance or was it simply prudent tax planning? After all, if Vodafone had designed the transaction in a deliberate ploy to avoid taxes, they could be held liable. But if they could prove they had simply executed the transaction without ill intention, maybe they’d get some reprieve. And after lengthy deliberations, the Supreme Court opined that the sale did not amount to tax avoidance. The judges ruled that Vodafone no longer had to pay taxes on this transaction and that should have been the end of this conversation.

But then, the government did something quite unpredictable. They introduced a new tax bill amending existing regulations all in an attempt to force Vodafone to pay up their “alleged” dues. It was retrospective legislation — meaning it gave tax authorities the leeway to reassess transactions dating back to 1962. And the amendments only affected parts of the tax code that allowed the Supreme Court to interpret the matter the way it did. So technically, if the matter went to court once again, the judges would be forced to rule against Vodafone.

And that meant, the company only had one option left. To pursue this case in an international court.

Vodafone approached the permanent court of arbitration at Hague contesting that the amendment of the tax code amounted to a gross violation of fair and equitable treatment promised under two separate Bilateral Investment Treaties (BIT)— The India-Netherlands BIT and the India-UK BIT.

It took them a while, but in the end, the international court ruled in favour of Vodafone arguing that India had breached the terms of the agreement and it must now stop efforts to recover the said taxes from the company.

So does this mean, the tax authorities can no longer pursue Vodafone?

Well… We can’t say for sure.

See, the international court also ruled that the government had to turn over the ₹45 crores they’ve collected so far (from Vodafone) and further compensate them for all the charges borne at the tribunal. That’s another ₹40 crores. So technically they might appeal the decision in one of those appeal courts. Or they could simply choose to not honour the verdict at all. After all, India has always contested that a tax demand such as this cannot be adjudicated by a foreign court i.e. If the legislators decide to pass a law, then all entities within the state are bound to honour it. Foreign courts have little jurisdiction here.

The only downside is that if the government disregards the ruling entirely, India’s place as an enticing investment destination might forever be damaged beyond repair. So what do you think?

Will the government finally relent? Or will they fight this one more time?

Let us know your thoughts on Twitter

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Also you can check our daily brief here. In today's issue we talk about Google's anti-trust case, Spotify's podcasts, and an out of the world marketing campaign. Do read the full draft :)

Until next time...

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Vodafone Business Moves to the Cloud in Just 6 Months

Key Takeaways

• Innovate for scalability.  Instead of needing to create a custom solution for every customer, Vodafone Business came up with a simple self-service solution where customers can personalize available features and functionality. Customers get exactly what they need and Vodafone Business is able to save time.
• Keep the people behind the technology at the forefront.  Digital transformation is first and foremost about empowering people, not just implementing the latest technologies. Placing the customer at the center was and is key to Vodafone Business’s success.
• Cloud is the future.  Migrating to Liferay DXP Cloud allowed Vodafone Business to reduce costs and drive productivity up. Functionality can go from idea to deployment faster.
• Business and IT teams weren’t unified.  The two teams had difficulty working together and aligning on vision in a way that ultimately delivered value to the customer.
• Industry disruptors were popping up everywhere. The advent of the digital age has meant that it’s easier than ever for new companies to become the competition and shake up the industry. Vodafone Business wanted to prepare for disruption—and do a bit of disrupting themselves.
• Their infrastructure was messy and expensive. The old platform was complicated. Making changes and updates was slow and costly to implement, meaning delayed time-to-market.

Implementation

5 ways liferay customers leverage liferay experience cloud sm.

• Support the end-to-end in-life customer lifecycle.  From the onboarding of services to the effective management of them, COVE gives Vodafone Business the ability to walk alongside their customers at almost every stage.
•    Put the customer experience at the center. Vodafone Business has made significant investments to improve the customer experience. Using Liferay Experience Cloud SM means COVE performs better and faster by mimicking local hosting. Vodafone Business can now also respond to and resolve issues more easily.
• Be equipped for long-term growth. Being on the cloud has resulted in not only lower, growth-friendly costs, but also put services in place that allow for future evolution and scaling.

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First major RCS campaigns with response rates up 25%.

of customers read the message.

of customers responded.

Vodafone is one of the world’s leading mobile network operators and is the first UK network provider to support RCS messaging across Android mobile devices.

While the mobile operator was experienced in using SMS and MMS for marketing and CRM communications, they were keen to meet customer expectations for seamless two-way digital experiences. With RCS, Vodafone saw a way to deliver experiences that are both familiar and innovative, ultimately helping to distinguish the brand’s communications.

To create its first major RCS messaging campaigns, the network teamed up with us and their creative agency, TMW.

Create more innovate messaging experience.

Trial RCS channel on a promotional campaign

25% of customers responded to the campaign.

Conversational messaging experiences have become an essential part of differentiating the customer experience (CX) a brand delivers to its customers. As tech giants scramble to create their own branded messaging apps to win the attention of 4.3 billion smartphone users , and with so many messaging apps on offer, what’s needed is a more ubiquitous messaging channel for delivering two-way conversational messaging experiences. That's where RCS comes in, and Vodafone was one of first UK network providers to leverage this channel

While the mobile operator was experienced in using SMS and MMS for marketing and CRM communications, they saw the potential of RCS as a way to deliver a more innovative messaging experience.

Treating customers on the bank holiday

For the company’s first RCS campaign, Vodafone wanted to take advantage of the Spring bank holiday. By timing the campaign around the holiday, it meant that the message could provide a relevant and thoughtful interaction at the exact point when customers were winding down for the weekend – and more likely to check their phones.

If the recipient responded ‘yes’ to the offer, they were presented with a three-card carousel containing seasonal offers from the network’s commercial partners. Each carousel card was customised with a specific image and text, with a CTA of ‘Redeem Now’. If the customer responded ‘no’, they received a link to personalised rewards and the opportunity to opt-out of future messaging.

To monitor the campaign’s success – and to ensure those without RCS enabled devices still received the offers – Vodafone also ran the campaign across SMS and MMS channels.

Father’s Day

Taking advantage of a seasonal event, Father’s Day, users were sent a message asking if they still needed to sort out a Father’s Day gift and if so, the VeryMe Rewards program was there to help.

Users could choose how they would describe the person they are looking to treat using 4 different buttons.

From what they selected, a relevant offer would be presented back to them. For example, picking the ‘proper chocoholic’ option would enable the user to redeem a gift from Hotel Chocolat.

Are you 5G-ready?

Aim of this campaign was to promote Vodafone’s new 5G-ready unlimited network plans.

After responding ‘Tell me more’ to an initial message asking ‘if they are ready for 5G?’, the user could select to upgrade to a 5G plan, which would direct them to the subsequent plan on a Vodafone page.

Users could also select to enter the VeryMe Rewards competition, browsing through different options contained in an interactive carousel - all of which sat within the native message.

With delivery receipt compatibility, RCS enables for accurate tracking of engagement. Looking at the success of the campaigns, RCS showed a clear advantage over SMS and MMS, consistently engaging the customer and inspiring action.

Spring bank holiday campaign

80% of customers read the message,

25% responded to the offer.

SMS and MMS scored a response rate of around 1%.

Father's day and 5G campaign

26% engagement achieved across both campaigns

Check out this guide to find out to how optimize your RCS marketing to it's fullest potential.

More telecom resources.

Adopting a multi-channel approach gave SMARTY a 500% uplift in campaign engagement.

A leading network operator using the latest digital channels.

A UK telecom company improved their customer interactions using Webex Connect and innovative channels like RCS.

RCS business messaging report.

Why RCS is a must-have channel for brands who want to deliver conversational experiences.

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