Vodafone opts for equity-linked rescue, Govt will personal 35.8%

DEBT-LADEN non-public telecom operator Vi on Tuesday mentioned it will settle for the choice supplied by the Department of Telecommunications (DoT) to transform curiosity on deferred spectrum public sale funds and adjusted gross revenues (AGR) to fairness.
In its launch to the exchanges, Vi mentioned the online current worth of curiosity associated to spectrum public sale dues and AGR would come to round Rs 16,000 crore. Since the common worth of Vi’s shares on August 14, 2021, which the Supreme Court determined could be the deadline, was beneath par worth, the corporate would situation shares to the Government at par worth of Rs 10 per share.
As a consequence, the Government would find yourself proudly owning 35.8% of complete excellent shares of the corporate whereas the shareholding of present promoters, Vodafone Group and Aditya Birla Group, would fall to twenty-eight.5 per cent and 17.8 per cent, respectively.
Currently, Vodafone Group owns near 45 per cent of Vodafone Idea, whereas Aditya Birla Group owns roughly 28 per cent stake.
By one other decision, the present promoters additionally agreed to amend the shareholder settlement and introduced down the minimal qualifying shareholding threshold from 21 per cent to 13 per cent.
This signifies that each Vodafone Group and Aditya Birla Group will proceed to carry rights to make essential choices in regards to the firm, resembling appointment of administrators and different key officers. It just isn’t clear but if the DoT, which can develop into the most important shareholder, will get the facility to nominate executives to the Vi board.
The choice to convert curiosity on deferred spectrum public sale funds and AGR dues was part of the telecommunications reform package deal authorised by the Union Cabinet final September. One of the most important reforms, which geared toward assuaging the ache of the sector and offering instant aid to debt-laden corporations, was the choice to supply a four-year moratorium on cost of all dues arising as a result of Supreme Court’s September 1, 2020, order on AGR.
This meant that telecom corporations may decide to pay the principal, the curiosity, and all different penalties, as determined by the highest courtroom, after 4 years, as a substitute of instantly. As a one-time alternative, the Government additionally gave telecom service suppliers the choice to transform the curiosity on this deferred cost into fairness on the finish of the four-year interval.
Among the non-public service suppliers with main deferred spectrum public sale and AGR dues, Bharti Airtel has opted to not take the interest-to-equity route even because it has opted for the four-year moratorium. Reliance Jio Infocomm had in October knowledgeable the DoT that it will not go for the four-year moratorium altogether.

Other than these two, Tata Teleservices (Maharashtra) additionally knowledgeable the exchanges on Tuesday that it will go for the interest-to-equity conversion, which might find yourself giving the Government 9.5 per cent of the full excellent shares of the corporate.
Vi, which is reeling beneath debt in extra of Rs 2 lakh crore, has been seeking to elevate funds from traders for fairly a while. The Government’s provide of deferred cost of AGR dues got here as a significant breather for Vi, which owed the DoT greater than Rs 58,000 crore on this class alone.
With Vi choosing conversion of its curiosity to fairness, it’s prone to release the corporate’s funds for enlargement. The firm will now look to take a position the funds made out there into constructing long-term capabilities and put money into newer applied sciences resembling 5G.
Most analysts imagine that regardless of all these measures, the important thing to Vi’s survival could be its means to boost recent funds within the close to time period to fulfill money circulation wants.
In a report, Credit Suisse mentioned that solely a considerable enchancment within the working efficiency would assist Vi “come out of this precarious situation”, and added that it had not “seen enough evidence for the sustained operational improvement”.

Some analysts imagine that the regulatory pressures on Vi may ease now because the Government comes on board as a majority stakeholder, whereas additionally opening the channel for higher regulatory measures.
“Bharti (Airtel) and (Reliance) Jio will need to be careful to not offend the Government with fierce promotions that undermine Vi. Better to compete on quality of service than price. The Government as owner of a large portion of the industry will be getting more feedback on the economic impact of its policies, and will probably be more sensitive to policy impact on operators,” mentioned Deutsche Bank Research in a observe.
Shares of Vi closed the day 20.5 per cent decrease at Rs 11.80.