Vodafone Idea Beats Expectations, Accepts to Give Equity to Govt

The telco’s move to accept and give such a large part of its equity to the government is a little surprising. Vodafone Idea’s cash flow situation had improved significantly from the announcement of the relief package by the government.

Highlights

  • Post the conversion of dues into equity, the Indian government will own about 35.8% of the outstanding shares of the company.
  • The telco’s move to accept and give such a large part of its equity to the government is a little surprising.
  • Vodafone Idea needs to find the rhythm and start adding new subscribers without which its success in the market is going to be very hard.

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Vodafone Idea

Vodafone Idea (Vi), the third-largest telecom operator in the country, is reportedly going to convert the full amount of interest dues related to the spectrum auction instalments as well as spectrum dues into equity for the Indian government. According to a Reuters report, the telco’s board approved for the move. With this, the current promoters will own a lesser stake in the company than the government.

Post the conversion of dues into equity; the Indian government will own about 35.8% of the outstanding shares of the company. The Vodafone group’s share will fall down to 28.5%, while the Aditya Birla Group will own about 17.8% of the company.

Vodafone Idea’s Move a Surprising One

The telco’s move to accept and give such a large part of its equity to the government is a little surprising. Vodafone Idea’s cash flow situation had improved significantly from the announcement of the relief package by the government. Further, the telco was also expected to move ahead with fundraising activities which should have helped with making new investments and reducing debt.

But now, Vodafone Idea’s equity is also going to be owned by the Indian government. This means that the company will stay in the market now. How the government ownership will affect the company remains to be seen.

Vodafone Idea needs to find the rhythm and start adding new subscribers, without which its success in the market is going to be very hard. Vi already has the smallest subscriber market share and revenue market share amongst all the private telcos.

Bharti Airtel recently announced that it wouldn’t be converting the dues into equity for the government. Airtel has good enough business that it can pay off the debt to the government in a very comfortable manner and also invest in networks at the same time. A lot of things might change for Vodafone Idea post the acceptance of converting dues into equity for the government.

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