Vodafone Idea (Vi) recently announced that it would be opting for the conversion of debt into equity for the government. This move has been termed as surprising by Tony Verghese, Partner, J Sagar Associates (JSA). In a statement, Verghese said that this move from the telco is very unexpected and surprising.
“The move of conversion to equity, of its debts relating to interest due on spectrum in favour of the Government, by Vodafone Idea is indeed very surprising and unexpected,” said Verghese.
Vodafone Idea Will Stay Afloat for Sometime Because of This Move
With the dues significantly reducing for the telco after the conversion of debt to equity for the government, Vodafone Idea will be able to sail through the competition and stay afloat for quite some time. However, from a long-term viewpoint, the dilution of the current stakeholders and the government getting a bigger equity piece in the company is something that needs to be considered.
“It is unlikely that the business will sustain a long period unless the Government comes out with a definitive plan of reviving the business of Vodafone Idea in consultation with the existing shareholders,” said Verghese.
There’s another way this move could go. The Indian government might merge Bharat Sanchar Nigam Limited (BSNL) and Vodafone Idea (Vi) and then look for a purchaser in the future.
“Whether the Government may contemplate a move of combining the businesses of Vodafone Idea with BSNL, such as a merger and thereafter looking for a purchaser, is something that remains to be seen, given that the BSNL auctions have hit several roadblocks over the last few years,” Verghese added.
While the BSNL and Vi merger seems like a long shot, it is something that will be playing around in the minds of a lot of people. At the time of writing, Vodafone Idea stock is trading 13.47% in the negative on Tuesday morning at Rs 12.85.
