Govt to hire adviser to manage Voda-Idea equity conversion
1 min read . Updated: 21 Feb 2022, 06:09 AM IST
PremiumThe government will hire a transaction adviser to help manage the conversion of interest dues related to deferred spectrum payments and adjusted gross revenue into equity in Vodafone Idea Ltd, a senior government official said
NEW DELHI : The government will hire a transaction adviser to help manage the conversion of interest dues related to deferred spectrum payments and adjusted gross revenue into equity in Vodafone Idea Ltd, a senior government official said.
The adviser, along with the finance ministry and the department of telecommunications, will determine how much the government will hold in the third-largest telecom operator, a second government official said, requesting anonymity.
Vodafone Idea proposed the government convert interest dues amounting to ₹16,000 crore for a 35.8% stake in the struggling operator.
“The transaction adviser will evaluate the quantum and valuation but, overall, the equity conversion will be a straightforward transaction," the first official said, also declining to be identified.
Vodafone Idea opted for converting its dues to stock last month, exercising an option offered by the government in September as part of a rescue package for struggling telecom operators. The package offered telcos a moratorium on the deferred spectrum and adjusted gross revenue (AGR) payments for four years and to convert the interest during the moratorium period into equity.
The transaction adviser will be selected from firms empanelled by the department of investment and public asset management (DIPAM) and will decide the final quantum that needs to be converted. The department will oversee the equity conversion.
The transaction will see the government becoming the largest shareholder in Vodafone Idea. However, it will not intervene in the daily operations of the carrier or seek representation on the company’s board.
The conversion will reduce Vodafone Idea’s debt and dilute promoters’ stake, with parent Vodafone Group Plc and Aditya Birla Group expected to own around 28.5% and 17.8%, respectively, if the government accepts the company’s proposal.
While the telecom package has provided temporary relief to the company, the average revenue per user (Arpu) growth remains the most critical factor for its long-term viability.
While Arpu for the quarter ended 31 December rose to ₹115 from ₹109 in the prior quarter, analysts have said that the levels need to rise to ₹250 over the next three-to-four years for it to sustain the leverage. Gross debt, excluding lease liabilities but including interest, rose to ₹ ₹1.99 trillion in the December quarter, including deferred spectrum payment obligations of ₹1.1 trillion, AGR liability of ₹64,620 crore due to the government.
