Additional equity conversion by Centre independent of plan to sell stake: Vi CEO

New Delhi: Vodafone Idea’s discussions with the government to take additional equity in the telco as part of the reforms package were independent of the Centre’s decision to sell its holding, according to the chief executive officer of the telecom operator.

The government as a public shareholder is free to make decisions about its investments, chief executive officer Akshaya Moondra said in response to a query after India’s Not. 3 carrier announced results for the first quarter of FY25. "The only thing I would add to that is that whether the government continues with their shareholding or divests gradually or whatever they may decide to do is independent of what their policy is.”

The Financial Express reported last week that the government had approached sovereign wealth funds—Abu Dhabi Investment Authority, Qatar Investment Authority, and Singapore’s Temasek—to see if they were interested in buying its 23.8% stake.

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The conversion of debt to equity was a way to support the balance sheet of the company and the policy of the government “remains the same”, Moondra said. “What they do with their public shareholding, which it is, that is their decision.”

The reforms package was announced primarily to have three healthy private operators, he said.

Vodafone Idea’s obligations to the government stand at ₹2.09 trillion, including a deferred spectrum payment of ₹1.39 trillion and an adjusted gross revenue liability of ₹70,320 crore.

The carrier’s losses narrowed to ₹6,434 crore for the quarter ended June 2024, from ₹7,674 crore the year before. Revenue shrunk to ₹10,508 crore from ₹10,606 crore, even as it recorded 12 consecutive quarters of 4G subscriber additions taking its 4G base to 126.7 million.

Average revenue per user, a key metric of profitability, improved 4.2% on-year to ₹146 for the No 3 carrier with 210 million subscribers, but it remained flat on a sequential basis.

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The Aditya Birla Group-promoted carrier said that it was in talks with lenders to secure debt funding of ₹35,000 crore to expand its networks. The unprofitable telco raised ₹24,500 crore over last few months through India’s largest FPO, giving equity worth ₹2,460 crore to its equipment vendors Nokia and Ericsson in lieu of pending dues, and issuing preferential equity shares worth ₹2,080 crore its promoter group.

The carrier, along with rivals Airtel and Jio, raised tariffs by 10-21% across the board, which Moondra said was a step towards better return on investment and to improve cash generation to support the large investment requirements.

Moondra said that immediately after the hikes, portouts to BSNL increased. “The reason for that is, of course, that they have not increased their tariffs, so there is a fair amount of arbitrage. However, we are watching the space,” he said.

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He also expected that 4G customers used to good coverage to return. State-run BSNL has yet to commercially launch 4G and 5G services across India.

To be sure, the real impact from the tariff hikes is expected to kick in by end of the ongoing quarter and the next quarter ending December 2024.