Vodafone wins two lawsuits against the Community and the Madrid City Council for 104 million

Vodafone Spain has won two important legal proceedings against the two Madrid administrations —autonomous and municipal— that will have a future positive impact on its accounts of 104 million euros, according to company sources.

The first ruling is from the Supreme Court, which last January upheld an appeal by the operator against a ruling by the Superior Court of Justice of Madrid, considering that the firm should not pay the Property Transfer Tax (ITP) for the radio spectrum, since that this is already taxed by the spectrum reservation rate, which would mean double taxation.

The highest instance of the judiciary in Spain agreed with the operator in a conflict it had with the Community of Madrid, considering that the ITP is a tax managed by the autonomous communities, while spectrum management is a national competence, with Therefore, the resources captured in this way are not intended to guarantee the optimal use of a “scarce” resource such as the spectrum.

In addition, it is a double taxation on the same good, since it is subject to the electromagnetic spectrum reserve fee that the operators with frequencies pay annually to the State and whose amount is contemplated in the General State Budgets.

The ruling of the Supreme, applicable to the rest of the autonomous communities that collect this tax, supposes the return of 87 million euros in concept of ITP unduly paid for the acquisition of spectrum, to which must be added interest of 11 million.

Another ruling of the Superior Court of Justice of Madrid will mean the return of 17 million euros for the annulment of the ordinance of the rate for use and exploitation of public roads that the Madrid City Council charges for infrastructures and fixed networks that are laid on the ground .

Vodafone is still pending the evaluation of another ruling, in this case from the Second Section of the Contentious-Administrative Chamber of the Constitutional Court, which annulled the settlement of 29.8 million euros demanded by the Treasury from the telecommunications company for the National quota of the Tax on Economic Activities (IAE) for the year 2013, which is levied on mobile phone operators, as it is contrary to European directives.

The operator is now estimating default interest to know the positive impact it will have on its accounts.

Fiscal Year Losses

The Vodafone group in Spain recorded consolidated losses of 462.8 million in its last fiscal year (ended March 31, 2022), 7% more than those obtained in the previous fiscal year (-432 million euros), according to the accounts deposited in the Mercantile Registry by Vodafone Holding and the dependent companies that group the operator's business in Spain.

The multinational does not disaggregate the results of its subsidiaries when it publishes its annual accounts, so it is necessary to resort to the Registry to know the net profits or losses.

The accounts were negatively affected by the 85 million allocated to the operational restructuring of the company, whose main chapter was the Employment Regulation File (ERE) undertaken by the group for 406 employees in September 2021, which was provisioned at a cost of 64.7 million.

Discounting this effect, the net result would have been a red figure of 378 million.

The losses occur in a context of a very competitive market marked by

offers , although this pressure "has been offset by the efforts to save, contain costs and efficiencies put into practice by the company in all areas (digital , commercial, etc.)”, according to company sources.

Total revenues reached 4,180 million euros, 0.3% more than in the previous fiscal year, supported by the increase in sales of mobile phones and devices.

On the other hand, service revenues reached 3,714 million euros —representing a decrease of 2% due to price competition— partially offset by

and tourists, as well as the increase in business in the segment of companies and public administrations.

"The company's commitment to digitization and cost reduction, a new organizational model and a more agile culture made it possible to maintain a consistent financial structure," the same sources indicate.

The investment in licenses and deployment of infrastructures has been 1,047 million in the fiscal year of 2022, 26% more.

This includes 350 million for 5G spectrum licenses in the 700 megahertz (Mhz) band and another 563 million for mobile and fixed installations and infrastructure, 200 million more than a year earlier.

Likewise, Vodafone completed its restructuring plan, changing the management model from its own stores to franchises and optimizing other areas of the organization.

At an individual level, the results of the two main group companies were: o Vodafone Spain, which mainly includes the mobile business, has recorded a reduction in revenue of 44 million euros, going from a net amount of turnover of 2,955 million the previous year to 2,929 million during the current year.

Regarding the operating result, the company increased its losses by 14 million, going from losses of 322 million in 2021 to 336 million in the current year.

For its part, Vodafone ONO, which mainly comprises fixed business, has had revenue growth of 7 million euros, going from a net turnover of 1,211 million the previous year to 1,218 million during the current year.

Regarding the operating result, the company reduced its losses by 20 million —from 93 million to 73 million— in the last financial year.

Vodafone Holdings Europe, the parent company of Vodafone Spain and Vodafone ONO, benefited from a loan from another of the Vodafone Group companies of 3,300 million euros to be repaid in five years until 2027. This guarantees equity solvency and business continuity of the operator in Spain.

During the year, Vodafone Holdings recorded a reversal of the value of the investment it holds in Vodafone Ono for an amount of 130 million, and 54 million in Vodafone Spain.

This means that the value of both companies increased by 184 million to reach a total of 5,282 million.

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