DoT to ‘activate’ conversion of Vodafone Idea dues into equity

The Telecom Ministry will ‘activate’ its plan to convert dues of Vodafone Idea into equity as soon as the telco demonstrates firm commitment as a serious long-term player in the market through fundraising or any other confidence-building measure, according to a senior government official.

The nod from market regulator SEBI came in earlier this year for the dues-to-equity conversion, and the Telecom Department is ready to “take the plunge” once VIL takes some “positive action”.

Any confidence-building measure would act as an assurance for the Department of Telecom (DoT), given that the government will neither have board representation in Vodafone Idea nor does it plan to interfere with decision-making within the telco despite the conversion giving it nearly 33 per cent stake.

Sources said necessary clearances came in from SEBI and DIPAM, and that DoT, too, is fully committed to supporting cash-strapped Vodafone Idea with the proposal to convert dues of the ailing telco into equity, according to a decision of the Cabinet.

Sources said DoT does not wish to dictate to the telco the positive actions that can be taken and has, instead, left it to the company’s own prerogative.

There are many innovative mechanismd and DoT is waiting for those measures to be taken, to action its proposal for conversion of dues into equity.

One such measure could be dilution of stake by promoters, or fundraising from a new investor.

The board of Vodafone Idea (VIL) is slated to meet on Friday (October 21) to consider issuance of debentures convertible into equity shares on a preferential basis, to a vendor. Speculation is rife that the unnamed vendor may be Indus Towers.

“…we wish to inform you that a meeting of the board of directors of the company is scheduled to be held on Friday, 21st October…to consider and evaluate a proposal for issuance of debenture securities convertible into equity shares on a preferential/ private placement basis to a vendor,” VIL said in a BSE filing on Wednesday.

The company did not divulge more details, including the name of the vendor, but said the proposal is subject to regulatory and statutory approvals, including shareholders’ nod.

VIL’s larger rivals — Reliance Jio and Bharti Airtel — have drawn up ambitious plans and committed firm timeines for expanding network coverage in India, the world’s second-biggest smartphone market after China.

Vodafone Idea, the country’s struggling third telecom player, plans to begin the journey to roll out 5G services, but has not offered specific timelines for the launch or coverage.

Aditya Birla Group Chairman Kumar Mangalam Birla — while speaking at the inauguration of the India Mobile Congress 2022 and launch of 5G services in the country by Prime Minister Narendra Modi on October 1 — had said the company will begin its 5G roll-out journey soon.

“We will soon begin 5G roll-out journey. We will leverage our strong presence in rural India, our enterprise customers, our tech partners, and global experience of Vodafone Group for progressively rolling out our 5G network and services in the coming period,” Birla had then said.

Financial pressures have been mounting on debt-ridden Vodafone Idea, despite the company opting to convert about Rs 16,000 crore of interest liability payable to the Centre into government equity.

Mobile tower giant Indus Towers is learnt to have asked Vodafone Idea to clear its outstanding dues and pay on time every month for continuity of business post-November. Sources had earlier said that American Tower Corporation (ATC), which has 75,000 mobile towers in India, too, was mulling steps to secure its dues. PTI