Vodafone Idea, the third-largest telecom operator might take the same decision as Bharti Airtel when it comes to converting the accrued interest dues into equity for the government (govt). Much recently, Bharti Airtel said that it is not accepting the option of converting interest dues into equity for the govt. Vodafone Idea might do the same as well. Things are much different now than they used to be.
The relief package announced by the government has changed the overall outlook of the telecom industry to positive. Even Vodafone Idea, which has huge debt on its books should feel comfortable with the significant ease in cash flow.
Telcos Could Easily Pay Off the Interest Dues
As a part of its relief package, the Indian government offered the telcos an option to convert their interest accrued on the deferred spectrum and adjusted gross revenue (AGR) dues into equity for the centre.
Accepting this would have meant that no matter what, the company would stay in the market over the long term as it would be backed by a government stake. But with the liquidity ease that has arrived with the announcement of the relief package, the telcos should be able to reinvest into their businesses in a better capacity and pay off the interest dues comfortably with a higher revenue backing.
While Vodafone Idea is yet to announce its views on the matter and we have had no communication with the company regarding this, there’s a very high probability that the telco would opt out of giving equity to the government. Vodafone Idea is in a much better position to raise fresh capital now and would not be worried about paying off dues to the government. With 5G, even enterprise revenues for the telcos would grow which should further add to the ease in cash flow in the medium term.
