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India becomes biggest shareholder in Vodafone Idea

India's government has become the largest shareholder in Vodafone Idea after the ailing telco opted to convert outstanding regulatory fees into equity.

The government will have a 35.8% stake in Vodafone Idea, reducing Vodafone Group's holding from 45.1% to 28.5% and that of Aditya Birla from 26% to 17.8%.

"The Net Present Value (NPV) of this interest is expected to be about INR16,000 crore [US$2.16 billion] as per the company's best estimates, subject to confirmation by the DoT [Department of Telecommunications]," said the exchange filing by Vodafone Idea.

"Since the average price of the company's shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of INR10 [$0.13] per share … The conversion will therefore result in dilution to all the existing shareholders of the company, including the promoters."

Vodafone Idea is the only operator to have opted for an equity conversion offer, which the Indian government offered as part of the telecom reforms announced last year.

Other measures included a four-year moratorium on payment of dues, reduced bank guarantees and a change to the definition of adjusted gross revenue (AGR).

The four-year moratorium on payment of dues may provide much-needed relief for the operator while it courts investors. According to Indian media reports, Vodafone Idea is believed to have been in talks with Google and Amazon regarding a possible investment.

The government's telecom measures should provide some clarity for prospective investors as Vodafone tries to clear AGR and other spectrum dues, pay off bank loans, invest in network modernization and participate in the upcoming 5G spectrum auction.

But the government stake risks being a discouragement for other investors, even if it takes pressure off Vodafone Idea.


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How government involvement will play out for Vodafone Idea is currently unclear. Authorities are already struggling to revive two state-owned telcos – Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). A merger between those operators and Vodafone Idea has been mooted but would be hard to execute and leave India with even fewer competitors.

Vodafone Idea currently has more than 270 million subscribers but has been losing customers for two years. As of September 2021, it had a gross debt of INR1.94 trillion ($27 billion), including bank loans, AGR dues and spectrum charges.

— Gagandeep Kaur, contributing editor, special to Light Reading

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