Vodafone Group has announced that it has reached an agreement with Vodafone Idea (Vi) on the final amount payable under the Contingent Liability Adjustment Mechanism (CLAM), which is set to expire on 31 December 2025. Alongside this, the two parties have also agreed on the settlement of outstanding Vodafone Group service charges, effectively closing all material open issues between Vodafone Group and Vi.
Background of the CLAM Agreement
The CLAM arrangement was established at the time of the 2017 merger between Vodafone India and Idea Cellular. It was designed to cover pre-merger contingent liabilities related to legal, regulatory, tax, and other matters of the two merging entities.
At the time of the merger, Vodafone Group’s maximum exposure under the CLAM was capped at INR 83.69 billion, equivalent to approximately €793 million. After accounting for payments already made over the years, the remaining exposure was reduced and capped at INR 63.94 billion, or around €606 million.
Details of the Final Settlement
Under the newly announced agreement, Vodafone Group will fully settle its remaining CLAM obligations through a combination of cash and equity-linked arrangements:
Vodafone Group will make a cash payment of €219 million.
Vodafone Group will set aside 3,280 million of its shares in Vodafone Idea for Vi’s benefit.
Vodafone Idea will have the right to instruct Vodafone Group to sell these shares in one or more tranches. Any cash proceeds from such sales will be transferred directly to Vi, providing the Indian operator with potential liquidity flexibility depending on market conditions.
No Net Cash Outflow for Vodafone Group
Despite the headline cash payment, Vodafone Group clarified that the final settlement does not result in any net cash outflow. This is because Vodafone Idea will simultaneously settle €219 million of outstanding Vodafone Group service charges, effectively offsetting the cash component of the CLAM settlement.
Both the outstanding service charges and Vodafone Group’s investment in Vodafone Idea shares are currently carried at nil value on Vodafone Group’s balance sheet, meaning the transaction is not expected to have a material impact on its reported financial position.
Impact on Vodafone’s Shareholding in Vi
Following the agreement, Vodafone Group continues to hold a 16.07 percent shareholding in Vodafone Idea. The shares being set aside as part of the CLAM settlement are equivalent to a 3.03 percent stake in Vi. These shares remain economically linked to Vodafone Group until Vi exercises its right to sell them and receive the proceeds.
Strategic Significance
This settlement marks an important milestone for both companies. For Vodafone Group, it brings long-standing legacy liabilities related to the 2017 merger to a definitive close, providing greater clarity and certainty for investors. For Vodafone Idea, the agreement removes a major overhang linked to historical contingent liabilities and offers potential financial flexibility through the sale of the designated shares.
