The government of India is set to receive ownership in two private telecom companies – the debt-laden Vodafone Idea and Tata group’s Tata Teleservices (TTL) – in lieu of the interest dues from them, as part of the revival package for ailing players announced last September.
Following the decision by the companies, the government will become the single largest shareholder in Vodafone Idea, holding 35. 8% in the country’s third-largest telecom company. The Vodafone group will see its holding drop from 44% to 28. 5%, while the Aditya Birla group will see its stake drop to 17. 8% from 27.7%. The government will also get stakes in two companies under Tata Teleservices (TTL). While it will get 9. 5% in the listed Tata Teleservices (Maharashtra) or TTML, the exact holding in the unlisted TTSL, that has services in 17 telecom circles, is yet not public.
Although telecom has been identified as a strategic sector, resulting in the government repeatedly
bailing out laggards MTNL and BSNL, the Centre will get shares in the two private companies at a time it wants to exit several sectors of the economy. The board of Vodafone Idea, which cleared the proposal, estimated that the interest payout for the delayed payments will be around £1.6 billion, which it decided to offer as equity.
Some analysts said that the entry of the government as the largest shareholder and the assurance of sovereign backing will be a positive for Vodafone Idea as it goes about raising funds from investors in India and abroad. In the case of TTL, the interest value estimated by TTML is around £85 million, although the same is not known for TTSL. The company had sold its mobility business to Airtel, and now runs an enterprise-focused broadband business.
While the government has given a long rope to the companies to comfortably work out their business plans towards a revival, analysts also say that it will be a tall task for Vodafone Idea to stage a comeback.