New Delhi: In a major development for India’s telecom sector, the Government of India has converted Vodafone Idea’s spectrum auction dues worth Rs 36,950 crore into equity. This strategic move increases the government’s stake in Vodafone Idea from 22.6% to approximately 48.99%, making it the largest shareholder in the financially struggling telecom giant.
As per a regulatory filing on Sunday, Vodafone Idea confirmed that the government would receive 3,695 crore equity shares at an issue price of Rs 10 per share. These shares are scheduled to be issued within 30 days of the order. This decision aligns with the relief package introduced for the telecom sector in September 2021, aimed at providing financial stability to struggling telecom companies.
The total outstanding spectrum dues include deferred payments that were originally repayable after the moratorium period. The Ministry of Communications stated: “In line with the September 2021 Reforms and Support Package for the Telecom Sector, the outstanding spectrum auction dues, including deferred dues repayable after expiry of the moratorium period, will be converted into equity shares issued to the Government of India. The total amount to be converted into equity is Rs 36,950 crore.”
Despite the government’s increased stake, Vodafone Idea emphasized that its promoters would continue to have operational control of the company. The filing reiterated: “Post the aforesaid issuance of equity shares, the Government of India’s shareholding in the company will increase from the existing 22.60% to approximately 48.99%. The promoters will continue to have operational control of the company.”
Earlier, Vodafone Idea CEO Akshaya Moondra sought approval from the Department of Telecommunications (DoT) for the equity conversion related to spectrum auction dues and Adjusted Gross Revenue (AGR) liabilities from 2012 to 2016. According to an Economic Times report, the letter highlighted Vodafone Idea’s inability to pay Rs 5,431 crore in cash or provide a bank guarantee for the shortfall in the 2015 spectrum auction payment.
This equity conversion is expected to provide significant financial relief to Vodafone Idea, allowing the company to focus on improving its network infrastructure, expanding its service coverage, and strengthening its market position. The move also underscores the government’s commitment to stabilizing the telecom sector, which has been under pressure due to high regulatory dues and intense market competition.
With this restructuring, Vodafone Idea aims to achieve financial stability, while the government’s increased stake positions it as a key player in shaping the company’s future trajectory.
