Vodafone Idea Giving Major Equity to Govt Makes It Appear Weaker to Investors: Counterpoint Research

Vodafone Idea (Vi), the third-largest telecom operator in India, has been the talk of the town for the last few days post giving away a major stake in the company to the government. The telco wanted to reduce the debt burden, which it has, but the cost was too high. With the government holding such a major piece of the company, it will appear weaker now.

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“Vi can now find it more difficult to attract investors as such a big equity dilution (at a lower trading value of Rs10 per share) with government being a majority stakeholder makes it appear weaker,” Charu Paliwal, an analyst at Counterpoint Research, told TelecomTalk, adding that the news is positive for the telco to stay afloat, but it will not be enough to attract the investors.

Reliance Jio, Bharti Airtel Positioned Much Stronger Now

According to Paliwal, the move from Vodafone Idea regarding giving away equity to the government will now further strengthen the position of its rivals, including Reliance Jio and Bharti Airtel.

In a statement, Bharti Airtel had said that it wouldn’t be going for the equity conversion option, and the same was expected by Vodafone Idea as well.

Vodafone Idea needs to work on bringing its capex up to ensure that its 4G networks are growing at a rapid speed to compete with the rivals. The telco also needs funding from investors to ensure that it can participate in the 5G spectrum auctions in full capacity.