Google reportedly looking to buy around 5% stake in India’s Vodafone Idea

Vodafone Idea
Image courtesy Vodafone Idea

Internet major Google is reportedly looking to buy around 5% stake in Indian telecom operator, Vodafone Idea, which has been struggling to pay AGR-related dues to the Indian government as ordered by the country’s Supreme Court.

According to a Financial Times report, Google’s parent company Alphabet lost out to Facebook in closing a deal to buy a stake in Reliance Industries’ Jio Platforms, and is now negotiating a possible deal with India’s third-largest telecom operator by subscribers.

As per reports, Google will have to pay $110 million or Rs 836.2 crore for a 5% stake in Vodafone Idea.

“Pursuing Vodafone Idea instead would potentially pit Google against Facebook and an increasingly dominant Jio, but the company could also make multiple investments in India,” the FT report said.

Vodafone Idea informed India’s stock exchanges that there was no proposal that is being considered at the Board. It, however, added that it is constantly evaluating various opportunities for enhancing the stakeholders’ value as part of corporate strategy.

“As and when such proposals are considered by the Board of Directors of the Company warranting disclosures, the Company shall comply with the disclosure obligations under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulation”),” Vodafone Idea said in a notice to the stock exchanges.

The development came at a time when Reliance Industries’ Jio Platforms has secured more than $10 billion in investment from Facebook and private equity groups including KKR, General Atlantic, Vista Equity Partners, and Silver Lake. 

Bharti Airtel’s promoter company Bharti Telecom Limited had also sold a 2.75% stake in the telecom operator to raise over Rs 8433 crores or $1.15 billion from institutional investors to fully repay the debt at Bharti Telecom.

The ailing telco is a joint venture between the UK’s Vodafone Group and India’s Aditya Birla group’s Idea Cellular. Vodafone Group has already written off the book value of its 45% stake in Vodafone Idea. The book value becomes zero in November 2019 compared to more than 2 billion euros in June 2018.

Both groups have already made it clear that they will not infuse fresh equity in their Indian telecom venture to help it pay adjusted gross revenues or AGR related dues, such as license fees, penalties and interest, dating back over 14 years, as ordered by the country’s Supreme Court.

Vodafone Group had late last year written off the book value of its Indian business. As per financial results released by Vodafone Group on Tuesday, the book value of Vodafone’s 45% stake in the joint venture, Vodafone Idea, has slumped to zero in November 2019.

Vodafone Idea recently received a much-needed fund infusion worth $200 million or Rs 1530 crore from Vodafone Group Plc. The payment was due in September 2020 under the terms of the contingent liability mechanism (CLM) with Vodafone Idea.

The group may further infuse Rs 285 crore or 35 million euros into Vodafone Idea by September, as per a pre-agreed mechanism. 

Vodafone Idea has been losing subscribers and revenue market share rapidly. It lost 3.62 million subscribers in January 2020 taking its overall base to 328.98 million. The fall could be attributed to the tariff hike it announced in the month of December.

To cut operational costs, the telco recently bunched its 22 circles into 10 clusters in India and is racing to complete its network integration by June.

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