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Vodafone Idea equity conversion complex issue, under discussion: Vaishnaw – ETTelecom

Bhubaneshwar: Vodafone Idea (Vi) needs capital infusion, and not just conversion of the mobile operator’s interest dues on statutory payments into government equity, telecom minister Ashwini Vaishnaw said Thursday, adding that the “complex issue” was under discussions.

“Vodafone Idea has many requirements. It has a particular requirement of capital. How much capital, who will infuse? All those things are under discussion at this point of time,” Vaishnaw told reporters. “The responsibility of capital has to come from various sources … All those things are complex issues.”

This is the first time the minister has commented publicly on the conversion of Vodafone Idea’s dues into government equity, which the telco has opted under a package for the telecom industry. The cash-strapped company has also been struggling for months now to raise funds to clear vendor dues and invest in its network. Amid a lack of funds, the operator – which hasn’t announced its 5G plans yet – has been rapidly losing subscriber and revenue market share to rivals Reliance Jio and Bharti Airtel.

Vaishnaw was speaking on the sidelines of an event to launch 5G services by Jio and Airtel in Odisha. At the event he said that state-run Bharat Sanchar Nigam Ltd would start 5G services in 2024.

Vodafone Idea has blamed the delay on the part of the government to convert its accrued interest on the deferred adjusted gross revenue (AGR) into equity as the reason for not being able to raise funds from external investors.

But a senior government official recently put the blame on the carrier’s promoters, telling ET that the unwillingness on the part of UK’s Vodafone Plc and the Aditya Birla Group to infuse adequate capital into the telco made it unviable for the government to convert the interest into equity. Banks have also pushed the telco’s promoters to put in fresh funds before lending more to the debt-laden mobile phone operator.

The accrued interest on AGR-related dues stands at close to Rs 16,130 crore and if the equity conversion happens, the government may get a 33% stake, making it the largest shareholder of the company, said analysts.

According to government officials, Vodafone Idea needs around Rs 40,000-45,000 crore for sustaining itself, and they want promoters to bring in half of this with banks funding the rest. “In the absence of promoter funding, it will be difficult for the company to get external investors,” ET quoted a senior official as saying in a news report published Wednesday. “Without promoter infusion, even banks are unlikely to support.”

Aditya Birla Group chairman Kumar Mangalam Birla is believed to have met top ministers and officials in the government earlier this week on the equity conversion matter.
A UK-India trade body has also sought the help of the Indian High Commissioner in UK in speeding up the conversion of the interest arrears into equity, which the telco had expected to be completed by April 2022. In a recent letter to Vikram K Doraiswami, the UK India Business Council said that the delay by India’s Department of Telecommunications (DoT) — despite a written clearance by the finance ministry and support of the Prime Minister’s Office — had hurt Vodafone Idea’s operations as it wasn’t able to raise funds.

It warned that if the issue wasn’t resolved soon as per the Cabinet decision, it would have more “negative implications” for the company and for the investment climate in India.

“Those in DoT that make decisions are verbally telling the company and its promoters that they want pre-conditions to the equity conversion, such as an additional equity commitment, which was never previously in the Cabinet decision,” said the letter, a copy of which ET has seen and reported on in its edition Thursday.

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