India Won’t See Any New PSUs in the Telecom Sector

The government has clearly said that the businesses will continue as professionally run private companies. These businesses will not turn into PSUs and the government can sell the shares it has at appropriate time and thereby receive the amounts due.

Highlights

  • Vodafone Idea and Tata Teleservices accepted the option of converting their statutory liabilities into equity for the government.
  • The government has clearly said that the businesses will continue as professionally run private companies.
  • Bharti Airtel and Reliance Jio had turned down the offer of giving equity to the government.

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The public sector units (PSU) in the telecom sector will be limited to Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), at least for the foreseeable future. Recently, Vodafone Idea and Tata Teleservices accepted the option of converting their statutory liabilities into equity for the government. With Vodafone Idea, the government is expected to become the largest equity shareholder in the company post equity conversion. This got many people worried about how the telco would perform or whether it will turn into a PSU. The Government of India (GoI) has come out with a FAQ for clearing the doubts that many people have.

Private Telcos Will Keep Running the Business

The government has clearly said that the businesses will continue as professionally run private companies. These businesses will not turn into PSUs, and the government can sell the shares it has at an appropriate time and thereby receive the amounts due.

The move of taking equity in these private companies against the dues would help with reviving the sector to its fullest potential. The Indian government had announced a relief package last year in September with an aim to improve the cash flow situation of the telcos. It had also offered them the option to convert their deferred liabilities interest dues into equity for the centre.

Bharti Airtel and Reliance Jio had turned down the offer of giving equity to the government, while Vodafone Idea and Tata Teleservices had accepted the equity conversion. This removes any potential threat to Vodafone Idea as a going concern, at least for the medium-term. Vodafone Idea needs to focus on improving mobile networks and reaching more places to add new customers. The government has firmly said that it is not looking to interfere with the businesses of the telcos. But how silent a partner the government will be in is something that only time will tell.

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