Vodafone Idea (Vi) has been in a thick soup for some time now with the Indian government regarding its Adjusted Gross Revenue (AGR) dues. Now, the company has decided to provide the Indian government with a 35.8 percent equity stake after its board has approved the conversion of dues and spectrum auction instalments into equity. This according to the board will help save the third-largest telecom operator in India from collapsing.
Vi is a joint venture between British telecom group Vodafone and Aditya Birla Group’s telecom subsidiary Idea. The company has been struggling financially to keep afloat since the arrival of Reliance Jio, which undercut the competition with free call benefits and affordable data prices.
Apart from the AGR dues, Vi also owed New Delhi dues of approximately $6.76 billion.
Following the decision to turn dues to equity, Vodafone Group’s shares will be diluted to 28.5 percent, and Aditya Birla Group’s shares will be diluted to 17.8 percent. With this, the Indian government will become the largest shareholder in the joint venture.
With the announcement of the news, shares of Vodafone Idea dropped by 20.54 percent and was seen trading at Rs 11.80 at market close.
Bharti Airtel, which also owes the Indian government dues remained almost flat today, as it has stated that it will not be converting the interest on deferred spectrum-related payments and government dues into equity.
Today’s announcement from Vi has come after months of the Indian government giving it and other operators time to pay dues on a two-decade dispute. The dispute was basically that the government was asking the operators to pay the license and spectrum fee as a share of their revenue. Whereas, the operators were arguing that only core income accrued from use of spectrum should be considered for the calculation of adjusted gross revenue.
Both Airtel and Vi had sought relief on the $14 billion they owe to the government, the plea was rejected by the Indian Supreme Court last year. Vi hasn’t reported any annual profits since 2017.
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