NEW DELHI: Telecom operator Vodafone Idea on Tuesday informed that it has opted for converting the interest on spectrum and adjusted gross revenue (AGR) dues into government equity. Following the decision, the government will hold around 35.8 per cent shares, the promoter shareholders would hold around 28.5 per cent of Vodafone Group and 17.8 per cent Aditya Birla Group.
"The conversion will therefore result in dilution to all the existing shareholders of the company, including the promoters. ...It is expected that the government will hold around 35.8 per cent of the total outstanding shares of the company, and that the promoter shareholders would hold around 28.5 per cent (Vodafone Group) and around 17.8 per cent (Aditya Birla Group), respectively," said the company.
Last year, the government announced a reform package to rescue the cash-strap telecom industry. As per the package, the Department of Telecommunications (DoT), on Oct 14, 2021, had provided various options to the operators including deferment of spectrum payment due up to four years, one-time opportunity to opt for deferment of AGR related dues as determined by the Supreme Court by four years, and a one-time opportunity to pay interest for the deferment period on spectrum instalments and AGR dues by way of conversion into equity.
In the board of directors' meeting, held on Jan 10, 2022, Vodafone Idea decided to approve the conversion of the full amount of such interest related to spectrum instalments and AGR dues into equity. The Net Present Value (NPV) of this interest is expected to be about Rs 16,000 crore, subject to confirmation by the DoT.
"Since the average price of the company's shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the government at par value of Rs 10 per share, subject to final confirmation by the DoT," informed Vodafone Idea.
Among its rivals, Bharti Airtel has opted for the moratorium but not the equity conversion while Reliance Jio went for neither. However, the announcement failed to excite the Street as shares of Vodafone Idea tumbled as much as 20 per cent on Tuesday.
The share touched an intraday low of Rs 12.05, before closing at Rs 11.95. The experts believe the move will help attract investors. Edelweiss Broking said that the decision does not necessarily result in any significant liability reduction, but the government's presence increases the likelihood of long-term survival.
VI's total debt comes to Rs 1.95 lakh crore as of Sept-end that includes deferred spectrum payment of Rs 1.09 lakh crore and AGR liability of Rs 63,400 crore that are due to the government. SBI has the highest exposure to Vodafone Idea among other lenders.
Vodafone Idea shares tumble 20 per cent
The announcement failed to excite the Street as shares of Vodafone Idea tumbled as much as 20 per cent on Tuesday. The share touched an intraday low of Rs 12.05, before closing at Rs 11.95