The government is set to take 33 per cent equity in Vodafone Idea after converting all interest related to payments for spectrum and other dues into equity.
Govt now majority shareholder
This now makes it the largest shareholder in the financially-stressed telecom joint venture between UK’s Vodafone and Kumar Mangalam Birla-owned Aditya Birla Group.
Vodafone India said in a market filing on Friday that it has been directed to issue 16,13,31,84,899 equity shares for Rs. 10 each.
India’s telecom sector was disrupted by the entry of Reliance Jio, which pushed some rivals out of the market.
State of India’s telecom sector
Massive dues owed to the government compounded the telecom sector’s troubles.
Fifteen entities, most of them telecommunication companies, owe the government Rs 1.47 lakh crore in adjusted gross revenue dues.
Of these, Rs 92,642 crore is unpaid licence fees and Rs 55,054 crore is outstanding spectrum usage charges.
In September 2021, the central government had announced a four-year moratorium for telecommunication companies to repay their dues.
The next month, the Centre gave the companies various options to clear the dues as part of the moratorium, one of them being a one-time opportunity to convert the interest on this deferred payment into equity at the end of the four-year period.
The development comes nearly 13 months after the Vi board cleared the interest conversion.
Conversion of dues
Vodafone Idea’s board in January last year had approved the conversion of dues owed to the government into equity which the govt has now cleared.
The government decided to convert the interest dues of the telco into equity after Aditya Birla Group gave its commitment to run the company and bring necessary investment.
The latter part is the govt’s condition that promoters of Vodafone Idea must infuse funds into the telco before any equity conversion could take place.
A top official, aware of the developments, said that this demand, which was the main point of contention, had now been resolved.
Birla Group’s pledge
Telecom Minister Ashwini Vaishnaw said, “We had sought a firm commitment that the Aditya Birla Group would run the company and bring necessary investments.
The Birlas have agreed and hence we have agreed to convert. We want India to be a three-player market plus BSNL and ensure healthy competition for consumers.”
The investments can come either from the Birlas or along with its partners.
With this, no shareholder approval would be required for the issuance as it follows a government order.
Company executives believe that this would help them tie up fresh funding to clear pending dues and investment in the 5G network..