Govt agrees to convert Voda Idea interest dues into equity

“There has been a commitment (from the promoters to invest). The government needs to ensure the industry remains a three-(private) player market and remains healthy,” a top official said.

The equity conversion issue has been hanging fire for over a year, delaying the cash-strapped operator’s plan of raising funds from external investors that it desperately needs to clear dues of vendors such as

and expand its existing 4G network. It also needs to urgently finalise 5G equipment supply deals with the likes of Ericsson and Nokia for rolling out next gen networks and stem rapid subscriber losses.

Vodafone Idea is co-promoted by the UK’s Vodafone Plc and India’s Aditya Birla Group (ABG). After the conversion of accrued interest of about Rs 16130 crore into equity, the government will become the largest shareholder of Vodafone Idea with a stake of around 33 per cent.

Emails sent to Vodafone Idea, the Aditya Birla Group and UK’s Vodafone Group didn’t elicit a response.

Vodafone Idea shares ended 1% higher at Rs6.89 on the BSE on Friday.

It’s been a year since Vodafone Idea opted for the option to convert the interest into government equity. The telecom department didn’t move forward with the conversion due to the lack of willingness by the promoters to invest a substantial amount in the company, ET reported in its January 4 edition.But things have changed since, with a series of meetings between the company and officials in the telecom and finance ministry over the last few weeks.

The official further said Vodafone Idea needs around Rs 40,000-45,000 crore overall for sustaining itself and in the absence of investment from promoters, no external investor will come on board.

The operator itself has been trying to raise Rs20,000 crore via a mix of equity and debt for several months, but hasn’t managed to close it. The company has blamed the delay in the equity conversion as the reason for it being unable to close its fund raising.

At September end, Vi had a net debt of around Rs 2.2 lakh-crore with a gross cash balance of Rs 190 crore. The company’s dues to banks and other lenders stood at Rs 15,080 crore. Trade payables, reflecting dues to vendors such as tower firms and suppliers including network providers, was at Rs 15,030 crore.

Besides needing funds urgently to clear its dues to large vendors such as Indus Towers, ATC, Nokia and Ericsson and banks, the telco has to roll out 5G services as well as expand 4G coverage and rein in customer losses to

Jio and .

The government in September 2021 had approved a relief package for the telecom sector, which among other measures, allowed carriers to defer payment of AGR-related dues by four years. It had also allowed telcos to convert the interest on such accrued dues into government equity. Vodafone Idea had opted for such an equity conversion in January 2022.

Officials had told ET earlier that before the finalisation of the revival package, Vi’s promoters had assured the government that they would invest around Rs 10,000 crore. Since January 2022, the telecom operator has received a little over Rs 4,900 crore from promoters, a bulk of which was used to clear some dues of tower company Indus Towers.