Vodafone Starts Audit Into Possible Tax Fraud at Ono Unit

By Amy Thomson and Rodrigo Orihuela  

Photographer: Angel Navarrete/Bloomberg

An employee enters the headquarters of Grupo Corporativo Ono SA in Madrid.

Vodafone Group Plc (VOD) said it has begun an audit into possible tax fraud at Grupo Corporativo Ono SA, the Spanish cable operator it bought in July for 7.2 billion euros ($9.1 billion).
The mobile-phone carrier “instigated a forensic audit to investigate the facts relating to the alleged fraud” as soon as it became aware of the issue, Newbury, England-base Vodafone said yesterday, after El Pais newspaper reported the investigation. The probe has to do with value-added tax declarations that Ono allegedly failed to make, Vodafone said.
According to El Pais, Ono failed to declare value-added tax at a division with revenue of more than 200 million euros from the s
ale of international calling minutes.
Vodafone, the world’s second-largest wireless carrier by customers, agreed to buy Ono in March as part of a plan to add Internet and TV services across Europe. The purchase was intended to help Vodafone turn around its Spanish business, which has been chipped away by price wars and a sluggish economy causing revenue declines for the last four fiscal years. Service revenue fell 13 percent in Spain in the year ended in March.
The company is spending 19 billion pounds ($31 billion) in a network improvement program through March 2016, putting funds into faster mobile and broadband networks and expanding into more services. Vodafone bought Kabel Deutschland Holding AG for 10.5 billion euros last year to bulk up its network in Germany.
Vodafone will withhold bonuses for three Ono managers tied to the acquisition, according to a report in online publication El Confidencial.
Vodafone shares traded 0.3 percent higher at 201.15 pence at 8:41 a.m. in London, valuing the company at 53.3 billion pounds. The stock had declined 32 percent this year through Oct. 24.