Govt open to a comprehensive package for Vodafone Idea, with conditions

It wants promoters to pitch in first or bring new investors

The government is open to the idea of a comprehensive package for the survival and revival of Vodafone Idea (VIL), besides what it has offered under a relief package for telecom companies, including converting part of their dues into equity – an option already availed by the debt-ridden telco.
 

But any such measure is contingent on the telco’s existing promoters Aditya Birla group and Vodafone plc putting in additional funds or bringing in new investors, according to top government sources.
 

VIL has publicly said that it is still awaiting communication from the government on converting debt into equity.
 

The sources noted that though the government hasn’t set any deadline for VIL to raise funds, it has asked the company to come up with a new business plan for its survival, as it is not looking to launch 5G services any time soon. A senior government official pointed out: “We want VIL to survive and to do that, we know that a more comprehensive restructuring of its dues needs to be done. It takes time to find a solution. But we find no reason why its promoters cannot put in additional money. We have asked VIL to come up with a new business plan and have not set any deadline for the plan or fundraising.”
 

According to those aware of these developments, a comprehensive package may include various alternatives to revive a company.

The draft Telecom Bill seeks powers under which the Department of Telecommunications (DoT) can waive part or entire fees, interest, additional charges, and penalties to the government and grant exceptions to a telco from the provisions of the Act, in the interest of consumers, competition, or public interest. The DoT already announced a telecom relief package last year, following Cabinet approval, under which it offered the conversion of dues into equity.
 

VIL accepted this offer and decided to convert interest for four years on deferred spectrum instalments and AGR dues into equity for the government worth around Rs 16,000 crore. As a result, the government would have held nearly a 33 per cent stake in VIL after the conversion. But it did not move on the conversion as it wanted VIL promoters or strategic investors to put in money.
 

But the government may have to do more as most of VIL’s liabilities are in government dues. Currently, VIL’s gross debt stood at Rs 220,300 crore and the bulk of it was on account of dues to the government, including Rs 136,600 crore as deferred spectrum payment obligation and Rs 68,500 crore as AGR dues; FIs’ (financial institutions’) debt was pegged around Rs 15,000 crore.
 

In March this year, VIL raised Rs 4,500 crore from its promoters (Vodafone plc gave Rs 3,375 crore and the Birlas put in the rest). The fund was raised to settle dues that the company had in Indus Towers.
 

But in its annual report for FY22, Vodafone plc ruled out any further payment under the contingent liability mechanism scheme, which was put together during the merger, and it capped at Rs 6,400 crore as it found “significant uncertainty in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism”.
 

VIL also signed up with ATC Towers, to which it owed around Rs 2,000 crore, to offer optionally convertible debentures in the telco for Rs 1,600 crore. But on Tuesday, the company said that offer lapsed as it was linked to the government converting its interest dues into equity.   

SURVIVAL STRATEGY

• The government hasn’t set any deadline for VIL to raise funds
• The Centre has asked the company to come up with a new business plan for its survival, as it is not likely to launch 5G anytime soon 
• A comprehensive package may include various alternatives to revive the company