In a significant move to support the financially struggling telecom operator Vodafone Idea (Vi), the Indian government has decided to convert ₹36,950 crore of the company’s outstanding spectrum auction dues into equity. This decision will increase the government’s stake in Vodafone Idea from 22.6% to approximately 48.99%, making it the largest shareholder in the company.
The equity conversion is part of the September 2021 Telecom Sector Reforms Package, aimed at providing relief to debt-laden telecom companies. Vodafone Idea has been directed to issue 3,695 crore equity shares at a face value of ₹10 each within 30 days, following necessary approvals from regulatory authorities such as the Securities and Exchange Board of India (SEBI).
Despite the government’s increased stake, operational control of the company will remain with its private promoters, Vodafone Group Plc and the Aditya Birla Group. The move is expected to provide Vodafone Idea with much-needed financial relief, enabling the company to stabilize its cash flow and reduce subscriber churn. Analysts believe this development will also help the telecom operator secure funding for its pan-India 5G rollout.
Vodafone Idea has been grappling with massive debts and intense competition in the telecom sector. The company was the last among its peers to launch 5G services, which began in Mumbai earlier this month. The equity conversion is seen as a lifeline, reducing the company’s immediate financial obligations and ensuring its survival in the competitive market.
This is the second such equity conversion for Vodafone Idea. In February 2023, the government converted ₹16,133 crore of interest dues into equity, taking a 33% stake in the company at the time. The latest move underscores the government’s commitment to supporting the telecom sector and preventing an industry duopoly.
