Vodafone Idea equity conversion: FM Sitharaman says ‘govt not bearing company's debt’

Finance Minister Nirmala Sitharaman on Saturday said that the government is not bearing the debt of Vodafone Idea, but has taken equity shares of the firm. On Friday, the Centre allowed Vodafone Idea to convert its dues worth Rs 16,000 crore into equity shares, which made it the single largest shareholder in the cash-strapped telecom company.

The telecom company incurred the dues for use of airwaves including the interest related to payments for spectrum. Last year, the Department of Telecom computed the net present value (NPV) on the interest on the spectrum and adjusted gross revenue (AGR) on deferred statutory dues at Rs 16,133.1 crore. 

Speaking at a press briefing on Saturday, Sitharaman said: “We are not bearing their (Vodafone-Idea) debts. The company is not in the position of giving the due to the government. That's why we are taking the company's shares. This means we are shareholders in the company. When the company will gain profit, we will also get the profit."

Adding to this, a Financial Ministry official said: "This is not being done to one company. The scheme was announced on September 2021 which was applicable to all Telecom companies in the context of the Supreme Court judgment, which imposed a retrospective due which had not been accounted for any of the Telecom companies that came to this company before the AGR situation arose." 

Vodafone Idea has been awaiting the move ever since the government announced a relief package for the telecom sector in September 2021.

The official added: "Reliefs were given to every company. Options were given to the companies, take the moratorium and pay the interest or you can take the moratorium and convert the interest into equity. This was offered to all companies. Three of them picked it up. Two of them later said that they don't need the equity conversion option."

Earlier, VIL had said that with the conversion of dues into equity, the government will get around a 33 per cent stake in the company, while the promoters’ holding would come down from 74.99 per cent to 50 per cent.

The government has said that it won’t be part of the company’s management and will neither have any representative on the board.

“We had sought a firm commitment that Aditya Birla Group would run the company and bring necessary investments. Birlas have agreed and hence we've agreed to convert. We want India to be three-player market plus BSNL and ensure healthy competition for consumers," Telecom Minister Ashwini Vaishnaw said in a statement.

Earlier, Vodafone Idea said: “The government has directed the company to convert the net present value of the interest related to deferment of spectrum auction installments and AGR dues into equity shares to be issued to the government of India…The company will take all necessary actions forthwith to undertake the aforesaid issuance.”