Vodafone Idea, the third-largest telecom operator in India might see the government stepping in and getting a stake in the company. A person aware of the matter told ET Telecom that the government is considering getting a token stake in Vodafone Idea. But the government will not infuse any capital into the company. It will only look to convert a part of the telco’s dues as equity for itself.
This might be good news for Vodafone Idea since it has the kind of debt which will be hard for a company to pay if its cash flow is negative. The government could also covert more dues of the company into equity for itself if it deems so. It will be a decision that might be discussed in the Cabinet meeting on Wednesday.
Government Wants India to be 3 Player Market
According to the official, the government wants India to be a three-player market only. As per the filing of Vodafone Idea, its debt as of June 30, 2021, was Rs 1.92 lakh crore. Out of this, the telco owes only Rs 23,400 crore to the banks and other financial institutions and the rest of the amount is owed to the government.
This move from the government will instil confidence in the current investors/promoters of the company who are worried about not getting enough support from the company. If the investors feel that the government is backing the company, they might start pouring in money from their side as well.
Another thing that’s left to be discussed in the Cabinet meeting on Wednesday is the proposal of a relief package for the telecom sector. The telecom sector getting short-term relief will further alleviate concerns of Vodafone Idea going out of the market anytime soon. Since Vodafone Idea has been unsuccessful in raising Rs 25,000 crore, it will be hard for the company to clear its dues fast and also be able to reinvest in its networks.