According to Deutsche Bank, Vodafone Idea’s debt is too large, and the government can help the telecom by converting its debt to equity by merging Vi with BSNL. The government can prevent both BSNL and Vodafone Idea from going out of business.
Let’s find out the “how” in detail!
Merging Vi And BSNL
Both Bharat Sanchar Nigam Limited (BSNL) and Vodafone Idea (Vi) don’t have enough cash inflow to keep going for a long time and neither of the telecoms has been profitable in a long time. There is already news out there after the Supreme Court ruled out any relief on VI huge AGR dues.
Now Looking at this, Deutsche Bank said that the only viable solution for the government to save either of the telcos is to merge them, reported ET Telecom.
Even if this happens, according to the brokerage, Vi investors should not have a major problem because the telco’s debt is 6x more than its current market cap, which is not a positive sign.
How Can Indian Government Provide A Path Out Of Debt?
The future of Vodafone Idea has been called into question, especially after the Supreme Court refused to grant any relief on the company’s massive AGR debts.
Also Vodafone Idea almost owes the Department of Telecommunications (DoT) Rs 1.5 lakh crores in deferred spectrum payment dues and adjusted gross revenue (AGR) dues.
According to an article published yesterday, both the Vi promoters, the Aditya Birla Group and Vodafone Group Plc, are willing to lower their stake in the firm if another investor is willing to take it over.
However, the promoters also have stipulated that the new investor must purchase the company’s shares at a price higher than the existing market pricing.
This could be a viable solution for the government to ensure that both BSNL and Vodafone Idea does not go out of business, effectively turning India into a telecom duopoly market.
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