Telecom

Indian govt to convert debt into equity in Vodafone Idea ahead of 5G auctions: Report

Indian government will convert its debt into equity in Vodafone Idea in a bid to help the struggling telecom company strengthen its infrastructure and participate in 5G auctions in India.

Published:Mon, June 20, 2022 2:34pm

By Shweta Ganjoo

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5G spectrum auctions in India will take place on July 26. Ahead of the spectrum auctions, the Indian government will convert its debt into equity in Vodafone Idea in a bid to help the struggling telecom company to strengthen its infrastructure and participate in spectrum auctions in the country.

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According to a report by the Financial Express, the government is planning to convert the debt of Rs 16,133, which the telecom operator owes to it, into equity. After the debt is converted into equity, the government will hold a 32 percent stake in Vodafone Idea, which is popularly known as Vi. On the other hand, stake of the company's promoters, which includes UK's Vodafone Group Plc and India's Aditya Birla Group, will dilute from the existing 75 percent to 50 percent.

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Furthermore, the report says that the decision of the government to convert the company's debt into its equity will be accomplished in a time span of two to three weeks and as a part of this decision Vi will issue shares to the government on a preferential basis, which will be held by the department of investment and public asset management (DIPAM).

The equity conversion is being seen as an important step in helping the telecom operator participate in the upcoming 5G spectrum auctions. So far, the Vodafone Group and the Aditya Birla Group have infused a total of Rs 4,500 crore in the telecom operator. Now, the company needs to raise additional Rs 20,000 crore, which the company is hoping to raise from investors and lenders.

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It is worth noting that once the equity conversion is complete, the government will become one of the major shareholders of the company. However, the report says that it has already notified the telecom operator it will treat its share in the company as 'public shareholding' and not promoter's. This means that unlike the Vodafone Group and the Aditya Birla Group, both of which are the company's promoters, the government will neither participate in the management nor have a board representation in the company.

Separately, the company is also planning to raise funds up to Rs 500 crore by issuing equity shares or convertible warrants. ANI citing the regulatory filing in the stock exchanges wrote that the window for purchasing shares of the company will remain closed until the Board meeting on June 24, 2022, and that it will reopen on June 25, 2022.

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