India's telecom sector primarily features two major players: Jio and Airtel. Additionally, there are two other companies, Vodafone Idea (Vi) and Bharat Sanchar Nigam Limited (BSNL). Among these, BSNL is working on a revival, buoyed by government support for the rollout of indigenous 4G and 5G networks, along with budget allocations to expand infrastructure. On the other hand, Vi continues to face challenges due to statutory liabilities, including spectrum dues and adjusted gross revenue issues.
However, there’s some good news for Vi subscribers. The government plans to convert the outstanding spectrum payment dues into equity shares valued at Rs 36,950 crore. In simple terms, this means the government will acquire a stake in Vi in exchange for settling the company's spectrum payment obligations. Consequently, the government’s share in Vi will rise from 22.6 percent to 48.99 percent. According to a report from ET, Vodafone UK's stake in Vi will drop to about 16.1 percent, down from approximately 24.4 percent, while the Aditya Birla Group's ownership will decrease from just over 14 percent to around 9.4percent.
This marks the second time the government has stepped in to assist Vi. A similar move took place in February 2023, when the government’s previous 33 percent stake was diluted to 22.6 percent after Vodafone UK infused capital into the company. This action will enhance the commercial viability of the venture and contribute to preventing the establishment of a duopoly within the industry.
What does it mean?
Vi's private sector promoters, namely Vodafone Plc from the UK and the Aditya Birla Group (ABG) from India, will maintain operational control over the company. However, both entities are expected to experience significant reductions in their ownership stakes. While Vodafone and ABG will still influence the strategic direction and management of Vi, their reduced equity shares could affect their financial leverage and decision-making power moving forward.
The government will maintain majority ownership in the company; however, it will not have operational control. This distinction sets it apart from BSNL, where the government is involved in making operational decisions.
In a recent exchange filing, Vi announced that the Ministry of Communications has decided to turn the outstanding spectrum auction dues, which also include deferred payments due after the moratorium period, into equity shares for the Government of India. This decision aligns with the Reforms and Support Package for the Telecom Sector, established in September 2021.
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