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Indian government will soon be a majority stakeholder in Vodafone Idea

Strapped for cash, Vi opted to turn over equity while its competitor Airtel remains confident of repayment.

Vodafone

Vodafone Idea’s Board of Directors has approved the conversion of the full amount of interest arising out of the company's spectrum auction installments and AGR (Adjusted Gross Revenue) dues into equity, as per a regulatory filing with the National Stock Exchange. It means that the Indian government will now be a stakeholder to the tune of 35.8 percent in India’s third-largest telecom company. The filing revealed that the Net Present Value (NPV) of the interest is around Rs.16,000 crores, according to the estimates of the company. It also added that after the conversion, Vodafone Group will hold around 28.5 percent and the Aditya Birla Group will hold around 17.8% respectively. This rescue plan was crucial for Vodafone Idea, which has been losing customers to bigger rivals, Bloomberg explained in its report. It affected the company’s financial health as the price war, started by Reliance Jio, in 2016 precipitated severe loss of revenue. Why did Airtel reject the path of conversion? Bharti Airtel, like Vi, also opted for the four-year moratorium on AGR and spectrum dues last year but decided to not opt for conversion of interest on deferred spectrum and AGR dues into equity last week, according to Moneycontrol. One of the analysts Moneycontrol spoke to suggested that "the move hints at the company’s intent to prepay the deferred due early and not dilute the existing shareholders in favor of government equity". "This decision is a show of confidence by the company to be able to bear the liabilities early…

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