Bringing an end to a fairly long drawn $6.7Bn dues payments battle, Vodafone India announced today that its board had approved the conversion of the full amount of its spectrum and adjusted gross revenue (AGR) dues to equity. In simple terms, it means, the Indian government will own 35.8% of the wireless telecom operator and become the largest shareholder.
The telco had owed the government dues of nearly $6.76 billion. Following the conversion, the stakes of its promoter shareholders, Vodafone Group and Aditya Birla’s Group will now be diluted to 28.5% and 17.8% respectively. Earlier, they had stakes of 44.39% and 27.66%, respectively.
In a regulatory exchange, Vodafone Idea announced the same. Out of the ₹58,254 crores it owed the government, it had paid only ₹7,854 crores. An exchange filing by the company showed that the net present value of the interest owed by Vodafone Idea to the government currently stands at ₹16,000 crores.
The equity shares will be issued to the Indian government at ₹10 per share, subject to final confirmation by the DoT (Department of Telecommunications). The price has been decided since the average price of Vodafone Idea’s shares on August 14, 2021 was below the par value of ₹10 per share.
Vi’s shares are currently trading at ₹12.95 as market responded negatively to the news. Airtel, the other major telecom company that owes large dues, has already said no to a similar proposal.
“The shares may be held through the statutory undertaking of the Unit Trust of India (SUUTI) on behalf of the Government of India or by any trustee-type or other suitable arrangement,” said Vodafone Idea.
This development comes in the backdrop of the decision by the government last year. In September, the Union Cabinet approved reforms to address the liquidity needs of telecom companies. The government also announced a telecom relief package, presenting telcos like Vodafone Idea and Airtel with various options. This included deferring spectrum and AGR dues for four years, converting interest on the said amount to equity shares, reduced bank guarantees, and others. Vodafone Idea accepted the four-year moratorium, though Bharti Airtel chose not to convert the amount into equity.
Nonetheless, the relief package was indeed a “relief” for both companies, who faced the short end of the stick after Reliance Jio entered the market and established itself as the biggest fish in the pool. With the package, Vodafone Idea (which has not reported annual profits since 2017) can save up to ₹1 lakh crore cumulatively over four years.