The government would like to see Vodafone Idea (Vi) present a clear fund-raising plan before it converts the cash-strapped telco's accrued interest on deferred adjusted gross revenue (AGR)-related dues into equity, officials familiar with the matter said.
"If the promoters (Aditya Birla Group and Vodafone Plc) are not willing to put in more money into the company, they should dilute their stake and bring in a new investor. Just depending on government support won't do any good to the company," said one of the officials who asked not to be named.
At present, discussions are going on between the Department of Telecommunication (DoT) and Vi regarding the equity conversion proposal.Another official said the government is not shying away from the equity conversion but the company should also take some initiative to raise capital. A third official said the telco had indicated that fund raising was on the anvil, but the government wants to see concrete moves.
The DoT is taking a cautious approach as it feels that Vi will find it difficult to compete against financially stronger rivals Reliance Jio and Bharti Airtel by just depending on government support, and without substantial external funding.
The government in September 2021 had approved a relief package for the telecom sector, which among other steps, allowed carriers to defer payment of AGR-related dues by four years. It had also allowed telcos to convert the interest on such accrued dues into government equity. Vodafone Idea had opted for such an equity conversion in January, 2022.
"The Cabinet has cleared the proposal (for equity conversion) and it will be adhered to by the government. But taking equity is meant to be an interim (relief) measure, so that the firm can recover. The company still must fight on its own in the market," said ..
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