VodaIdea vests 35.8% ownership on govt in debt-equity swap

13 Jan 2022


Vodafone Idea Ltd, the country’s third-largest mobile phone operator, will now be majority government owned, after its board approved conversion of dues into equity, vesting nearly 36 per cent of its ownership on government.

Accordingly, Vodafone Idea will convert interest related to its spectrum auction instalments and AGR dues to the department of telecommunications, with a net value of about Rs16,000 crore. into equity.
Vodafone Idea had earlier opted for the four-year moratorium on spectrum and AGR dues.
The Department of Telecommunications had in October 2021 presented Vodafone Idea and Airtel with various options to obtain from the telecom relief package announced in September.
This included deferment of spectrum and AGR dues for four years, and converting interest on the said amount to equity shares.
Vodafone Idea announced on Tuesday that it will accept the Indian government’s proposal to convert its spectrum and adjusted gross revenue (AGR) dues to equity, making the government the largest shareholder of the company. And, the implied cost of this conversion is Rs10 a share, a 32 per cent discount on Monday’s (10 January) closing price.
“The shares may be held through the statutory undertaking of the Unit Trust of India (SUUTI) on behalf of the Government of India or by any trustee-type or other suitable arrangement,” the company said in its filing with stock exchanges. SUUTI is a government investment arm that owns significant stakes in publicly listed companies like HDFC Bank, ICICI Bank, State Bank of India, among others.
In fact, the average share price on the date (14 August 2021) was below par value (Rs10), the company noted in its filing.
This will result in dilution for all the existing shareholders of the company, including the founders, the debt-laden telco said in a stock exchange filing. Following the conversion of debt into equity, Vodafone Group Plc will own around 28.5 per cent and Aditya Birla Group will have about 17.8 per cent in the company, it said.
This is a big drop from the current shareholding of 44.39 per cent and 27.66 per cent, respectively.
This rescue plan was crucial for Vodafone Idea, a joint venture between the Vodafone Group and billionaire Kumar Mangalam Birla’s conglomerate, which has been losing customers to bigger rivals. Its financial health deteriorated after Reliance Jio Infocomm Ltd entered the telecom sector with ultra cheap data tariff plans and free voice calls. 
According to an exchange filing by the company, the net present value of the interest owed by Vodafone Idea to the government currently stands at Rs16,000 crore. Vodafone Idea has debt obligations of more than Rs7,000 crore maturing in Q3-Q4 FY22.
As per the telecom department’s estimates, Vodafone Idea had total AGR dues of Rs58,254 crore, of which the company paid Rs7,854 crore, leaving unpaid dues of Rs50,339 crore.
Against this, rival Bharti Airtel had AGR dues of Rs43,980  crore. The company paid Rs18,004 crore, leaving dues of Rs25,976 crore unpaid.
AGR is defined in the licence agreements entered between the Department of Telecommunications (DoT) and the telecom operators. Under this revenue-sharing fee model telecom operators are required to share a part of their adjusted gross revenue (AGR) with the government as annual licence fee and spectrum usage charges.

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