Vodafone Idea (Vi) announced on Sunday night that the government is converting Rs 36,940 crore of its outstanding spectrum dues into equity. The shares will be purchased by the government at Rs 10 each. Vi will issue a total of 3,695 crore equity shares to the government. This will take the government's shareholding in the telco from the current 22.60% to 48.99%. Vi has clarified that the "promoters will continue to have operational control of the company."
Since the government now has a majority stake in the company, it is worth taking a look at what the government said the last time it took equity in Vi.
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Government Won't Interfere with Vi
The Indian government has said that it won't interfere with the operations of Vodafone Idea (Vi). This is because Vi is a private company, and the government is only taking an equity stake in the company to avoid a duopoly between Jio and Airtel. Vodafone Idea's financial situation won't allow it to be able to pay back dues to the government in a timely manner without ruining the business. The telco is using the revenue to pay off dues, and the funds it raised are going towards the capex (capital expenditure).
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The government is only taking a stake in the company to help Vi with reducing its dues. In the future, when the telco is in a good financial position, the center will likely sell its stake and recover the money. Vi's capex plans includes expansion of 4G and roll out of 5G throughout India.
Vi will not face any interference from the government in their day to day operations. The telco's majority stake is now with the government, however, the key decisions and the business will still be managed by the promoters.
