Vi Might Have to Give More Equity to Govt in the Future

There's no clarity on whether the government would own more stake in the telco as neither has said anything about it. But JP Morgan believes that it can happen. The government already owns a 33.4% stake in the telco, and if it increases significantly from here, it can potentially hold close to 50% or more of the telco.

Highlights

  • Vodafone Idea recently gave a 33.4% stake in the company to the government.
  • Post the conversion of dues to equity for the government, the promoters' shareholding has come down to 50.4%.
  • The government has made it clear that it doesn't want to enter the telecom business any further and thus won't interfere with the management decisions of the telco.

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Vodafone Idea

Vodafone Idea recently gave a 33.4% stake in the company to the government. This was due to the conversion of interest dues on deferred AGR and spectrum into equity. While it would reduce the net debt that the telco has, it doesn't guarantee any future growth for the company. Analysts believe that Vi needs to raise funds in the short term to sustain and compete with the other private telcos. The government has already become the single largest stakeholder in Vi.




Post the conversion of dues to equity for the government, the promoters' shareholding has come down to 50.4%. This came come down even further in the future. The government may convert more dues of Vi into equity for itself once the moratorium period is over in FY26. According to an ET report, JP Morgan believes that in the long term, a part of the outstanding debt of Vi (dues on statutory payments) on spectrum and AGR will also be converted to equity by the government.

Read More - Airtel Added Almost 6 Million Active Users in Dec 2022, Much More than Jio

Will the Govt Own More than 50% of Vi?

There's no clarity on whether the government would own more stake in the telco as neither has said anything about it. But JP Morgan believes that it can happen. The government already owns a 33.4% stake in the telco, and if it increases significantly from here, it can potentially hold close to 50% or more of the telco.

Read More - Vodafone Idea Lost 20 Million Active Users in 2022

The government has made it clear that it doesn't want to enter the telecom business any further and thus won't interfere with the management decisions of the telco. Its stake in the company is only to reduce the pressure on Vi and to ensure that India doesn't become a duopoly market in the telecom space. Vodafone Idea is already in talks with the banks and lenders to raise funds in the short term.

Reported By

Tanuja is a passionate technology and telecom buff who has been following the telecom industry for several years now.

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