‘Govt equity in Vodafone Idea hinges on stock recovery’

The conversion of interest into equity stake for the government in Vodafone Idea (Vi) will be decided after the
telecommunications (telecom) company's stock price stabilises above Rs 10, India's largest mobile tower installation company
Indus Towers has said in its second-quarter report.
The board of Vi had, in January, approved the conversion of Rs 16,130 crore worth of interest on adjusted gross revenue
dues into equity for the government.
This will give the government around 33 per cent stake in Vi.
In September, the finance ministry cleared the proposal and now the Department of Telecommunications (DoT) needs to
finalise the transaction, said Indus Towers.
“According to the company law provisions, any equity infusion cannot be below par value (Rs 10) and hence, the equity
conversion will only be decided once the stock price stabilises above Rs 10,” said Indus Towers. Vi's stock has been trading
below Rs 10 since end-April.
Vi did not immediately react to the Indus Towers report. However, in September, Vi had denied that below-par share price
was holding up equity issuance. “There is no such guideline that prohibits the government from taking equity if the company's
share value is less than par value.
“We understand that prior to the announcement of the landmark telecom reforms in September 2021, all due diligence was
done by the government and the relevant ministries in this matter,” Vi had said in response to a news report.
The delay in equity issuance has impacted Vi's fundraising plans. The company is yet to finalise its 5G network contracts
and DoT has sought details of its business plans. The government's query is in light of its vision to have three private and one
state-owned telecom service providers in the market.
The issue of optionally convertible debentures worth Rs 1,600 crore to American Tower Corporation, too, is linked to equity
issuance to the government. Equity issuance is a condition precedent for the issue of debentures.
“Vi has stated that its 5G roll-out will depend on various factors, such as evolution of use cases, demand from customers,
capacity requirement, as well as competitive dynamics,” said Indus Towers, adding, “The company also highlighted it will
leverage its strong presence in rural India, its enterprise customers, and technology partners, as well as global experience of
Vodafone Group, for progressively rolling out its 5G network and services in the coming period without mentioning any specific
timelines for the roll-out.”