VERY SOON THIS BIG INDIAN TELECOM COMPANY CALLED VODAFONE IDEA MAY GET KILLED JOINTLY BY ITS PROMOTERS AND GOVERNMENT OF INDIA UNLESS A NEW BUSINESS TYCOON LIKE ADANI OR SOMEONE ELSE COMES FORWARD TO SAVE IT.

Before it's too late:-Govt must stick to its stand on Vodafone Idea

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Vodafone Idea | telecom sector | Business Standard Editorial Comment

Business Standard Editorial Comment  |  Mumbai 
Last Updated at December 12, 2022 22:33 IST

By Business Standard Editorial Comment  .. Mumbai | Last Updated at December 12 2022 22:33 IST ...Last year, the Union government had cleared a relief package for the financially stressed telecom sector to prevent the industry from slipping into a duopoly. The objective of that package will be lost if the government fails to stick to its stand on converting Vodafone Idea s interest dues into equity. 

As part of the reform package, telcos were given the option of converting part of their dues into government equity, and Vodafone Idea opted for it. With that, around Rs 16,100 crore of the telco s interest dues were to be converted into a 33 per cent government stake in Vodafone Idea. Both the finance ministry and the Securities and Exchange Board of India approved the conversion, but the government appears to be shifting the goalpost by setting new conditions before picking up equity in the company. 

While the government has not made any public statement on this, the Department of Telecommunications reportedly wants the promoters of Vodafone Idea to infuse funds into the company before the government goes ahead with converting its dues into equity. Even though there s merit in the government wanting the promoters of the joint venture to put in money into the business, the Centre should execute what it had proposed without any delay.

Time is of the essence in this case because Vodafone Idea, which has an accumulated debt pile of around Rs 2.2 trillion, mainly government dues, is losing subscribers at a fast clip and is unable to invest in the highly competitive telecom business. It s the only private telco to have stayed away from any 5G-related announcement. It had only demonstrated mild participation in the telecom spectrum auctions, including those for 5G services, earlier this year. Berkshire-headquartered Vodafone had famously said it would not put good money after bad, referring to its debt-ridden India business in partnership with the Aditya Birla group. 

The Indian partner too has not shown any interest to put in money, though the venture has time and again announced its intent to raise funds. It is here that the government s role is critical. That s because Vodafone Idea s fund-raising exercise is directly or indirectly linked to the government converting some of the telco s dues into equity.