Telecom

Govt clarifies doubts about Vodafone Idea operations after stake sale announcement

Govt explains that companies that have opted for the equity conversion route won't be turned into PSUs

Published:Wed, January 12, 2022 7:27pm

By Danny Dcruze

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Govt has offered clarifications about the latest announcement made by Vodafone Idea. The telecom company has decided to opt for equity conversion to clear pending dues to the government. The recent decision by VI has made the Indian govt the majority stakeholder in the third-largest telecom company in the country.

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The Ministry of Communications has released answers to frequently asked questions surrounding the stake sale. The official response from the ministry clarifies that the govt has not paid any money to get the majority shareholder status. Instead, this option has been offered in lieu of Vodafone Idea's liabilities to the govt. It also clarified that the government can sell these shares at an appropriate time and thereby receive the amounts due.

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Vodafone Idea has exercised its option to convert its dues into the government's majority stake in the company. This was done as per the Telecom Reforms Package announced on 15 September 2021.

The shares are being acquired as a result of high amounts of liabilities that have arisen due to various legacy issues. In order to provide some relief to the telecom sector players. Doubts have arisen about the operations of the company after the government's majority stake in VI. However, it has been clarified that the companies that have opted for the equity conversion route won't be turned into PSUs. These companies will continue to be managed as professionally run private companies.

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These legacy issues have put the Indian telecom industry under stress and govt is providing a way to pay the dues. In a statement released by the Ministry of Communication, the government said, "telecom sector is vital for our society, specially so in the post-Covid scenario. Therefore, government approved many structural and procedural reforms in September 2021."

As a part of these reforms, the telecom players were offered the option to convert liabilities owed to the government into equity/preference shares in favour of the government.

Justifying its move to provide Vodafone Idea with this option, the statement said, "It will also stop a scenario where there are very few players in the market. Such potential lack of competition could lead to higher prices & poor services. Enough competition in the market safeguards the interests of the common man.

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