Govt to proceed with equity conversion in Vodafone Idea
The government will hold 35.8% equity in the telecom carrier after the conversion
NEW DELHI: The government will appoint a transaction advisor for proceeding with conversion of interest from spectrum auction instalments and adjusted gross revenue (AGR) dues into equity in Vodafone Idea, a senior government official said.
The commencement of the conversion into equity to be held by the government in the beleaguered carrier indicates that the department of telecommunications has agreed with the calculations of dues amounting to ₹16,000 crore provided by Vodafone Idea, basis which the government will hold 35.8% equity in the third largest carrier post the conversion.
“A transaction advisor will be appointed to take this forward. We have not received any request for verification of the amount of dues, so the equity conversion will be a straightforward transaction,” the official
asking not to be named.
The transaction advisor will be appointed from a limited set of empanelled advisors under the ambit of department of investment and public asset management (DIPAM), the official added, and will decide on the final quantum that needs to be converted. The department will oversee the equity conversion.
Once the transaction is complete, the government will become the largest shareholder in Vodafone Idea Ltd, even though it will not intervene in the daily operations of the carrier nor hold a seat on the company’s board of directors.
Vi opted for converting its dues of about ₹16,000 crore to stock last month, exercising an option provided by the government in September 2021 as part of a rescue package, which offered telcos a moratorium on the deferred spectrum and AGR payments for four years and allowed them to convert dues arising from interest payments during the moratorium period into equity.
The conversion which will reduce the carrier’s debt burden, will lead to government owning 35.7% share, and dilution of promoters’ stake in Vodafone Idea, with parent Vodafone Group Plc and Aditya Birla Group expected to own around 28.5% and 17.8%, respectively.
While the telecom package has provided temporary relief to the company, the average revenue per user (Arpu) growth remains the most critical factor for the company’s long-term viability. While ARPU for the quarter ended December 31, 2021 rose to ₹115 from ₹109 in the prior quarter, analysts have said that the levels need to rise to ₹250 over the next 3-4 years for it to sustain the leverage.
The carrier’s gross debt excluding lease liabilities but including interest increased to ₹1.99 lakh crore for the quarter ending December 31, 2021, comprising deferred spectrum payment obligations of ₹1.1 lakh crore, AGR liability of ₹64,620 crore due to the government and debt from banks and financial institutions of ₹23,060 crore.