NEW DELHI: In a rare development, the Centre is set to receive ownership in two private telecom companies – the debt-laden Vodafone Idea and Tata group’s Tata Teleservices (TTL) – in lieu of the interest dues from them, as part of the revival package for ailing players announced last September.
Following the decision by the companies, the government will become the single largest shareholder in Vodafone Idea, holding 35.8% in the country’s third-largest telecom company. The Vodafone group will see its holding drop from 44% to 28.5%, while the Aditya Birla group will see its stake drop to 17.8% from 27.7%.
The government will also get stakes in two companies under Tata Teleservices (TTL). While it will get 9.5% in the listed Tata Teleservices (Maharashtra) or TTML, the exact holding in the unlisted TTSL, that has services in 17 telecom circles, is yet not public.
Although telecom has been identified as a strategic sector, resulting in the government repeatedly bailing out laggards MTNL and BSNL, the Centre will get shares in the two private companies at a time it wants to exit several sectors of the economy.
The government insisted that the move “in no way” means that it will take control of the companies and run them on a day-to-day basis. It does not want a management control and would rather prefer the companies to be managed by the current promoters, even as it plans to liquidate its positions in the future.
The board of Vodafone Idea, which cleared the proposal on Monday, estimated that the interest payout for the delayed payments will be around Rs 16,000 crore, which it decided to offer as equity.
The move, which saw the company’s scrip crash by 21% as it closed the day at Rs 11.8, was, however, seen as a positive by the analysts. Some analysts said that the entry of the government as the largest shareholder and the assurance of sovereign backing will be a positive for Vodafone Idea as it goes about raising funds from investors in India and abroad.
In the case of TTL, the interest value estimated by TTML is around Rs 850 crore, although the same is not known for TTSL. The company had sold its mobility business to Airtel, and now runs an enterprise-focused broadband business.
While the government has given a long rope to the companies to comfortably work out their business plans towards a revival, analysts also say that it will be a tall task for Vodafone Idea to stage a comeback.
The company, which runs a mammoth debt of around Rs 1.8 lakh crore, has to compete with stronger players such as Reliance Jio and Bharti Airtel even as it prepares for the transition to 5G and other modern telecom technologies.