Govt asks Vodafone Idea to convert interest dues into equity worth Rs 16,133 cr at Rs 10 per share

Government on Friday agreed to convert Vodafone Idea's interest dues into equity, said the telecom firm in a stock exchange filing. Vodafone Idea on Friday said that government directed it to issue shares worth Rs 16,133.1 crore at an issue price of Rs 10 per share. The dues are owed by the telco to the government for use of airwaves including the interest related to payments for spectrum.

Last year, the telecom department had computed the net present value (NPV) on the interest on spectrum and adjusted gross revenue (AGR) on deferred statutory dues at Rs 16,133.1 crore.

Earlier, VIL had said that with conversion of dues into equity, the government will get around 33% stake in the company.

"We had sought a firm commitment that Aditya Birla Group would run 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," said Telecom Minister Ashwini Vaishnaw.

''Ministry of Communications...passed an order today ie 3 February, 2023... directing the company to convert the NPV of the interest related to deferment of spectrum auction instalments and AGR dues into equity shares to be issued to the government of India,'' the filing said.

The company has been directed to issue 1613,31,84,899 equity shares of the face value of Rs 10 each at an issue price of Rs 10 each. 

The relief for the company comes as part of the reforms package announced by the government in September 2021.

Shares of VIL closed at Rs 6.89 apiece on Friday at the BSE, up by 1.03 per cent compared to previous close.

In October 2022, market regulator Sebi approved the conversion of Vodafone Idea dues into equity.

In 2021, Centre approved a rescue package for debt-strapped telecom companies, allowing them to convert interest on deferred adjusted gross revenue owed to the government into equity. India's telecom sector was disrupted by the entry of Mukesh Ambani's Reliance Jio and the sector's troubles had also been compounded by large dues owed to the government.

In 2020, Supreme Court gave telecom firms 10 years until 2031 to clear the dues.

Vaishnaw had last month said Vodafone Idea has various requirements, including infusion of capital, and discussions around this were on.

''Vodafone (Idea) has many requirements. It has a particular requirement of capital. How much capital, who will infuse? All those things are under discussion at this point of time. The responsibility of capital has to come from various sources. The company just doesn't require conversion. It requires capital. All those things are a complex issue,'' Vaishnaw had said.

The company has 24.3 crore mobile subscribers accounting for 21.33 per cent market share, as per latest data published by telecom regulator Trai.

VIL is the only telecom operator which is yet to place purchase orders for 5G services equipment and has been struggling to pay dues of its vendors.

Indus Towers last month made provision of doubtful debt worth Rs 2,298.1 on account of troubled balance sheet of VIL.

It is in process of issuing optionally convertible debentures of up to Rs 1,600 crore to vendor American Tower Corporation to clear its dues.

As on September 30 this year, the company's total gross debt, excluding lease liabilities and including interest accrued but not due, stood at Rs 2,20,320 crore.

The company has made several attempts to raise capital from investors but failed due to the adverse market condition and huge debt on its balance sheet.

With inputs from agencies