Vodafone Idea (Vi) opted for the conversion of deferred interest debt into equity for the government. Post conversion, the company said govt might own 35.8% of the company, which would be more than that what each of the current promoters, including the Aditya Birla Group (17.8%) and the Vodafone Group Plc (27.66%), would hold.
While many are concerned about this move as the government will have the biggest voting shares. But according to an ET Telecom report, a senior government official said that the centre is not looking at Vodafone Idea as a business interest. The focus was just to help the telco with liquidity issues and let the sector grow.
At the End of the Day, Actions Will Only Determine Govt’s Intentions
The Department of Telecommunications (DoT) will soon talk with the Finance Ministry to understand the procedure of converting the debt into equity. While the government has said that it is not looking to get voting rights or make the telco a public sector unit (PSU), the fact would be that a majority of the company is owned by the government. There’s no denying that this will affect the minds of the investors of the company.
Only time will tell how the inclusion of government is going to affect Vodafone Idea’s business. The telco will be able to benefit in the short to medium term, and any doubts of it continuing as a going concern are gone for the time being.
The government official further told ET that the entire idea behind the move was to help the companies in stress, and the government would be happy to offload its stake as soon as the operations of the telco stabilise.
Note that it isn’t going to happen anytime soon. Vodafone Idea will have to increase investments into networks which now it can as its cash flow issues have further reduced for the foreseeable future.
