Govt’s Vodafone move is a GAMECHANGER for India’s telecom sector. Here’s why

The central government has acquired a major stake in Vodafone Idea Ltd (VIL) and has approved conversion of over Rs 16,133 crore interest dues of the debt-ridden company into equity. The Centre now has a 35% stake in VIL and equity shares of face value of Rs 10 each will be issued at the same price, the company disclosed in a regulatory filing on Friday. This move is being considered a gamechanger for Indian telecom sector and it comes at a time when the VIL is in dire need of capital infusion. 

Why govt's stake in VIL will be a gamechanger

The Vodafone-Idea is currently seeking 'emergency loans' from different banks (both private and state-owned) to clear its dues toward Indus Towers which is the biggest company responsible for installing telecom towers. Vodafone's total due toward Indus Towers reportedly amounts to Rs 7,500 crore and it is monthly estimated as much as Rs 300 crore. 

With the Centre acquiring 35% stake in the company, major banks such as the State Bank of India (SBI), HDFC Bank, Punjab National Bankm and IDFC will approve loans to VIL, something which they were reluctant to do until now. This would also ultimately ease the debt burden on VIL which has accumulated to reach Rs 2 lakh crore.

Apart from Indus Towers, VIL is also indebted to ATC India, Nokia and Ericsson and other private and public sector banks.

This might also help VIL gain back some of its subscribers after 35 lakh of them chose Reliance Jio or Airtel mobile networks over VodafoneIdea in October 2022, says a report by the Telecom Regulatory Authority of India (TRAI). The loss of subscribers resulted from VIL lagging in the field of setting up 5G Networks as its rivals Jio, Airtel and another state-owned company BSNL have laid out plans for their respective 5G networks in India. Meanwhile, shares of VIL closed at Rs 6.89 apiece on Friday at the BSE, up by 1.03% compared to previous close.