The government finally stepped in to resurrect Vodafone Idea, the ailing telecom operator, and is going ahead to pick up around 33% stake in the company to emerge as the largest shareholder.
The action was taken in response to promoters Aditya Birla group and Vodafone Plc promising to invest up to £2 billion in addition to initiating the effort to launch the high-speed 5G network in order to compete with Reliance Jio and Bharti Airtel. The extraordinary government action was taken in response to worries that the telecom industry need at least three private firms in order to give customers a sufficient selection.
Despite the fact that the telco's shares closed at Rs 7 last week, up 3%, the government would purchase the equities at Rs 10 par value in accordance with the requirements of the Companies Act. According to a top source, "The government has granted all necessary permits, and Vodafone Idea will now go forward to offer equity to the government."
At the end of December 2022, the promoters hold around 75% in Vodafone Idea, with Vodafone Plc holding 48% and Aditya Birla Group 27%.
After the fresh equity infusion, the shareholding of the promoters will come down to around 50%, with the government emerging as the largest shareholder.
In a statement, Vodafone Idea said: "Ministry of Communications passed an order...directing the company to convert the NPV (net present value) of the interest related to deferring spectrum auction instalments and AGR dues into equity shares to be issued to the Government of India. This is in line with the reforms and support package for the telecom sector communicated earlier and the conversion option exercised by the company as provided therein.