In a significant move, Vodafone Idea (VI) announced that the government of India’s stake in the company will increase to 48.99% through the conversion of spectrum auction dues worth Rs 36,950 crore into equity shares. This development is aligned with the telecom sector’s reforms introduced in September 2021 to provide financial relief to struggling telecom operators.
Key Details of the Equity Conversion
According to Vodafone Idea, the outstanding spectrum auction dues, including deferred payments due after the moratorium, will be converted into equity under Section 62(4) of the Companies Act, 2013. The government issued an official order on March 29, directing the telecom giant to issue 3,695 crore equity shares at a face value of Rs 10 per share, within 30 days of obtaining necessary approvals from the Securities and Exchange Board of India (SEBI).
The pricing for the equity shares is determined based on the higher of the volume-weighted average price over the last 90 trading days or the last 10 trading days, preceding the relevant date of February 26, 2025.
Government’s Increased Stake and Operational Control
Post-conversion, the government’s stake will jump from the current 22.60% to approximately 48.99%. However, operational control will remain with the company’s existing promoters—UK’s Vodafone Plc and India’s Aditya Birla Group (ABG).
Background and Financial Challenges
This announcement follows Vodafone Idea CEO Akshaya Moondra’s appeal to the Department of Telecommunications (DoT) for urgent approval of the equity conversion. The request aimed to cover the company’s adjusted gross revenue (AGR) and pending spectrum dues from auctions held in 2012, 2014, 2015, and 2016.
With Vodafone Idea facing significant regulatory payouts and struggling to generate cash flow, the conversion is expected to provide much-needed financial relief. The equity move will help the company stabilize its financial position, ensuring continuity in operations while reducing debt obligations.
Conclusion
The government’s increased stake in Vodafone Idea marks a strategic effort to support the telecom sector’s recovery. By easing the debt burden and promoting financial resilience, this decision provides Vodafone Idea with a renewed opportunity to enhance services, expand infrastructure, and stay competitive in India’s rapidly evolving telecom market.
