Indian govt open to new plan to revive Vodafone Idea

Vodafone Idea can expect some relief as the Indian government has reportedly conveyed that it is open to the possibility of bringing a comprehensive support package for the survival and revival of the cash-strapped telecom operator.

The new package will be on top of what the Indian government has already offered under a relief package for telecom companies, including converting part of their dues into equity.

However, the government will only take any such measure if Vodafone Idea’s existing promoters Aditya Birla group and Vodafone infuse additional funds or bring in new investors, Business Standard newspaper reported.

Vodafone Idea needs a new business plan

Vodafone Idea decided last year to convert interest for four years on deferred spectrum instalments and AGR dues into equity for the government worth around Rs 16,000 crore ($1.98 billion), after which India would have held nearly a 33% stake in the telco after the conversion.

However, India did not move on the conversion, as it wanted Vodafone Idea promoters or strategic investors to put in money. The telco informed the media recently it is still awaiting communication from the government on converting debt into equity.

The government, as per the report, has asked the telco to come up with a new business plan for its survival since it has no plans to launch 5G in India. In the absence of 5G services, the telco may lose more customers to Reliance Jio and Bharti Airtel, both of which have already launched commercial 5G services.

“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,” a government source was quoted as saying by the newspaper.

Indian govt says stakeholder infusion a must

The government, however, believes that it will be difficult for Vodafone Idea to survive if a fresh capital infusion from VIL’s promoters does not come by January or February. The equity conversion can happen if the company shares a clear investment plan, including promoter fund infusion, according to a separate report by the Economic Times.

The ET report said that without more capital infusion from promoters, Vodafone Idea won’t have any cash to grow its operations or meet its sizable vendor dues, and could be headed towards bankruptcy. In such a situation, a potential 33% government stake in Vodafone Idea won’t have any value. “… which could be a possible reason behind the delay at the government’s end to do the conversion,” Rohan Dhamija, head (India & Middle East) at Analysys Mason, told the publication.

India is currently working on the Telecom Bill, currently in the draft stage. The draft bill seeks powers under which the Department of Telecommunications (DoT) can waive part or entire fees, interest, additional charges, and penalties to the government. It could also grant exceptions to a telco from the provisions of the Act, in the interest of consumers, competition, or public interest.

The government can use the Telecom Bill to bring new measures to revive Vodafone Idea, whose gross debt stood at Rs 220,300 crore ($27.2 billion) and the bulk of it was on account of dues to the government.