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This week, stricken telco Vodafone Idea (Vi) has revealed that the Indian government has converted INR369.5 billion ($4.3 billion) it is owed by the operator into equity, raising its stake in the business from 22.6% to 49%.
The move is related to a government relief package arranged for the telecoms sector back in 2021, which gave the government the option of converting Vi’s upcoming spectrum auction fees into shares.
Vodafone Idea’s latest financial reports in September 2024 showed that it has a total debt of $25 billion, around $18 billion of which was related to spectrum dues owed the government.
As such, this debt relief will offer a significant lifeline for the operator, with analysts speaking to The Economic Times suggesting that the move will offer the company INR400 billion ($4.67 billion) in cash flow over the next three years.
Vodafone Idea is currently struggling to remain competitive against its two larger rivals, Reliance Jio and Bharti Airtel, both of whom are not only more financially secure but also have a significant lead in infrastructure rollout.
Both Jio and Airtel launched commercial 5G services back in 2022, with combined subscribers topping 250 million. Idea, on the other hand, only launched 5G last week, having instead focussed on expanding and upgrading its 4G coverage.
This is the second time that the government has converted debts owed by Vodafone Idea into equity; in 2023, INR161.3 billion ($1.95 billion) of interest owed on spectrum and licence fees was converted into a 33% stake. This stake was subsequently diluted to 22.6% following Idea’s $2.16 billion follow-on public offering last year.
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