The government has no desire to run Vodafone Idea Ltd., the company’s top executive said a day after the carrier agreed to convert interest on deferred statutory dues into equity.
“The government is very clear. They want us to run the company. They want the promoters to run the company,” said Ravinder Takkar, managing director and chief executive officer of Vodafone Idea Ltd in a brief media conference held on Wednesday. “I’m saying that based on personal conversation with the government.”
There is no condition in the Department of Telecom’s letter that allows for a board seat for the government of India, Takkar said in response to a question on whether the government intends to seek board representation.
Takkar emphasised that both promoters, Aditya Birla Group and Vodafone Plc, remain committed to the telecom business and have hence agreed to a “significant dilution” of their equity ownership in the company.
On Jan. 11, Vodafone Idea announced that it was exercising an option offered by the government, as part of telecom relief measures in 2021, to convert interest payment dues to the government into equity. This will result in the government becoming the largest shareholder of the telecom company with 35.8%. Vodafone Idea is the third largest company in India’s telecom sector, behind the only two other players—Reliance Jio Infocomm Ltd. and Bharti Airtel Ltd.
Vodafone Idea will issue equity shares to the government’s special undertaking SUUTI. These will be issued on a preferential basis, said Takkar. He expects the entire process to be completed within a few months.
The financially distressed company has been losing subscribers to its competitors as it struggles to keep up network investments and maintain operations. Previous attempts at fundraising have yielded little result. The two promoters have remained hesitant at infusing further capital and external investors have followed suit.
Yet, Takkar said there is a huge investor interest in investing in India’s telecom sector. Most investors have expressed three concerns to him…
Does the government want three private players in telecom?
Will the government support reform in the sector?
Will the government support via liquidity/financing of the sector?
Takkar said the telecom relief measures announced in September 2021 underscored the government’s intent to ensure competition and viability and hence investor concerns have been addressed.
Vodafone Idea did not address any further questions on the road ahead, stating that it was in silent period on account of impending quarterly earnings announcement.
Watch the Vodafone Idea press briefing here.