Govt Becomes Largest Shareholder In Vodafone Idea With 33% Stake

The government has agreed to convert the interest dues worth ₹16,133 crore into equity of Vodafone Idea, after the investment commitment of Birlas.

The third-ranked telco in India, Vodafone Idea Ltd, is required by the Union government to sell equity shares in exchange for delayed adjusted gross revenue (AGR) and spectrum payments totaling 16,133 crore.

The completion of the equity conversion plan, which comes more than a year after the government made the first choice, gives Vodafone Idea some breathing room because of its 2.2 trillion-pound debt load as of September 2022. Since 2021, the loss-making telco has struggled to raise 20,000 crore through debt and equity.

“We wanted a strong guarantee that the Aditya Birla Group would manage the business and provide the necessary funding. 

Since the Birlas occurred, we decided to convert. In order to promote healthy competition for customers in India, we want the market to consist of three players plus BSNL”, According to a statement from Union Telecom Minister Ashwini Vaishnaw.

The business will immediately take “all necessary procedures” after the government has ordered that 16.13 billion shares with a face value of 10 per be given to it “Vodafone Idea also stated that the problem.

An official with knowledge of the situation said that before approving the stock conversion, government representatives spoke with Vodafone Idea executives about the company’s strategy for remaining competitive.

The person stated that although the government had requested the telco to obtain additional shares from its promoters or from outside investors, the conversion was not dependent on their generating money. 

For the government to move forward with the equity conversion, promoters were required to inject additional funds into the company and develop a business plan to revitalize it.

The government would have taken a 33% ownership position in Vodafone Idea under the equity conversion plan put up in January 2022, and the promoters’ ownership would have fallen from roughly 75% to 50%. 

However, given all of the changes that have occurred over the past year, it is uncertain what the Centre’s final shareholding will be.

The struggling telecom has been unable to pay its tower suppliers, American Tower Corp. and Indus Towers (ATC). 

When it offered optionally convertible debentures of 1600 crore rupees to ATC, it asked for better and delayed payment terms from them. 

It will use the money to settle certain outstanding debts owed to the tower operator for using its assets to rent out mobile phone services in India. 

Currently, Vodafone Idea owes ATC more than 3,000 crores, while the largest tower provider in the world, Indus Towers, is owed an extra 7,000 crores.

Since the No. 3 carrier consented to the government’s request to exercise the option as part of the reforms package unveiled in November 2021, the equity conversion has been on hold.