In a relief to Vodafone Idea, the telecom operator that has fallen into hard times with its inability to compete with the likes of Reliance Jio and Airtel, has been ordered to convert capital worth about $2 billion into equity. In a regulatory filing, the telecom operator revealed that it would “take all necessary actions forthwith to undertake the aforesaid issuance.”
The conversion of the capital comes as the Indian government is set to take 33% of the equity in Vodafone Idea, which will occur after the conversion of all interest related to payments for spectrum and other dues into equity and making it the largest shareholder in the telecom firm.
“Pursuant to Regulation 30 of the SEBI LODR Regulations, it is hereby informed that the Ministry of Communications, Government of India has, in line with the Reforms and Support Package for Telecom Sector communicated earlier and the conversion option exercised by the Company as provided for therein, passed an order today i.e. 3 February 2023 under section 62(4) of the Companies Act, 2013, directing the Company to convert the NPV of the interest related to deferment of spectrum auction installments and AGR Dues into equity shares to be issued to the Government of India,” the filing read.
Vodafone will now convert all the interest it owes to the government – a total of ₹16133,18,48,990 (₹161.33 billion or $1.96 billion) – into equity shares of the face value of ₹10 each. Once the conversion is completed, it will then issue 16.13 billion equity shares at an issue price of ₹10 each.
This development comes more than a year after Vodafone Idea’s board had approved the conversion of dues owed to the government into equity shares. That had been in January 2022, and it took the government over 12 months to clear the decision and direct Vodafone India to undertake the action. The shares of the telecom operator rose by 2.94% on Friday to be currently placed at ₹7. It also comes after the government received the green light from Aditya Birla Group to run the company and bring necessary investments into the debt-ridden and troubled telecom operator (Vodafone India is already working on issuing optionally convertible debentures of up to ₹1600 crores to American Tower Corporation to clear its dues).
“We had sought a firm commitment that the Aditya Birla Group would run the company and bring necessary investments. The Birlas have agreed and hence we have agreed to convert. We want India to be a three-player market plus BSNL and ensure healthy competition for consumers,” Telecom Minister Ashwini Vaishnaw said in a statement.