Mumbai, May 17: Vodafone Essar, UK-based Vodafone’s Indian arm, has shown a remarkable turnaround in the year ended March 31, with an operating profit of £15 million against an operating loss of £37 million in the year-ago period.

The turnaround is especially significant as it comes at a time the British telecom firm has decided to buy out its Indian partner — the Essar group — that holds a 33 per cent stake in the joint venture.

Revenue from Indian operations grew 23 per cent to £3.85 billion from £3.11 billion in 2009-10 .

According to a press release on the company’s website, Vodafone Essar has 13.45 crore customers as of March 31. The annualised mobile customer churn during the quarter ended March is, however, quite high when compared with western markets at 28 per cent for contract customers and 52.1 per cent for prepaid customers.

In the quarter ended March 31, Vodafone made net additions of 1.03 crore customers.

Voice revenues from India grew to £3.04 billion in 2010-11 compared with £2.54 billion in the previous year. Revenue from data services was up at £247 million from £169 million a year ago.

The Vodafone group’s revenue for 2010-11 was up 3.2 per cent to £45.9 billion.

The press release said, “In India, growth was driven by a 39 per cent increase in the average mobile customer base and stable use according to customer trends, partially offset by a fall in the effective rate per minute because of an increase in the penetration of lower-priced tariffs into the customer base and strong competition in the market.”

The company is battling with Indian tax authorities on a potential liability that may arise as it has not allegedly deducted withholding tax on a consideration paid to Hutchison Telecommunications from whom it bought its 67 per cent in what is now called Vodafone Essar.

“In light of the uncertainty created by Indian tax authorities’ actions”, Vodafone has sought confirmation from the Authority for Advance Ruling (AAR) in India on whether withholding tax is liable on its purchase of Essar’s stake in Vodafone Essar Ltd.

“The group does not believe there is any legal requirement to withhold tax in respect of these transactions but if, contrary to expectations, the AAR directs tax to be withheld, this amount is anticipated to be approximately $1 billion,” the release said.

Vodafone Essar’s results this year have been better than rival Bharti Airtel, which saw its net profit fall 32.64 per cent to Rs 6,046.7 crore in the year ended March 31 from Rs 8,976.8 crore in 2009-10.

Airtel’s total revenue for 2010-11 stood at Rs 59,467 crore against Rs 41,847 crore a year ago, up 42.1 per cent.