Government rescues Vodafone Idea, converts dues into 35% stake

As India's top two telcos Reliance and Airtel race ahead to provide 5G coverage across India, they keep gaining more subscribers at Vodafone Idea's expense. The joint venture between erstwhile Vodafone and Aditya Birla Group's Idea, has been unable to launch 5G, as it struggles to pay back AGR dues. But things might change for the better for Vodafone Idea, as the Indian government has agreed to convert the Rs 16,000 crore it owns as interest on adjusted gross revenues, into equities.

The deal which had been held up for more than a year, will make the government Vodafone Idea's largest shareholder with a 35 per cent stake. It will also clear the way for the telco to secure funding from external players, repay dues to Indus Towers that had earlier threatened to cut off services, and to finalise a deal for 5G equipment. According to a report by the Economic Times, the government has agreed to this in order to ensure that a third player survives in the telecom market, hence preventing a duopoly.

It was earlier reported that the department of telecom hadn't converted dues into equity, because the promoters of Vodafone Idea weren't willing to divest enough. They reportedly reached an agreement, since Vodafone Idea needs Rs 45,000 crore to sustain operations, and external investment wouldn't flow in without presence of promoters.