The third largest telecom major in the country Vodafone Idea has had major movements going on today, after the company announced to defer its spectrum auction installments and Adjusted Gross Revenue (AGR) dues for 4 years, on an immediate basis.
As a result, Vi will convert the full amount of deferment of spectrum auction instalments due up to four years and AGR-related dues by 4 years into equity to the Government.
This makes Govt own a stake of 35.8% in the loss-making telco, with its promoter group holding a 46.3% stake.
The question now arises that since the Govt holds a major stake in the third largest private telco in India, will it merge the operations of Vodafone Idea with its telecom company unit BSNL?
Govt Holds Over 35% Stake in Vodafone Idea
As per the telecom relief package rolled out by the Centre in mid-September 2021, private telecom company Vodafone Idea has opted for converting interest on deferred spectrum auction dues and AGR dues into equity, for up to 4 years.
After a detailed meeting on Monday, the company’s Board decided to go ahead with exercising the option and approved the conversion of full amount of interest, which comes out to be Rs 16,000 crore into equity.
The equity shares by Vi will be issued at Rs 10/share to the Govt, once confirmed by the DoT.
“The conversion will therefore result in dilution to all existing shareholders of the company including the promoters. Following the conversion it is expected that the government will hold around 35.8% of the total outstanding shares of the company and the promoter shareholders would hold around 28.5% (Vodafone Group) and around 17.8% (Aditya Birla group) respectively”, stated the company.
Will Govt Merge Vi with BSNL?
With the Government now becoming a major shareholder of Vodafone Idea, there are speculations of the former merging the latter with its own telecom company BSNL.
Trak.in reported yesterday that the Centre could merge the operations and assets of he Bharat Broadband Network Limited (BBNL) with BSNL before the ongoing FY ends, acting upon its view of merging all of its telecom operations under a single umbrella.
However, the chances of the Govt to merge a loss-making private telco like Vi with its own loss-making telcos BSNL and MTNL is highly unlikely.
This is solely because all of these companies are immersed heavily in debt, despite MTNL and BSNL having received a revival package of Rs 69,000 crore in 2019.
According a TOI official, merging the two telcos will lead to a financial mess and it would not benefit either the government or Vi’s subscribers.