The government is set to own 35.8 percent in Vodafone Idea and 9.5 percent in Tata Teleservices after the two telecom operators decided to offer equity stake against their dues related to spectrum auction installments and AGR payments.
This conversion will result in massive equity dilution for all Vodafone Idea shareholders with the government becoming the largest shareholder. The government said that this doesn’t mean that it will take control of the companies and run them on a day-to-day basis.
It is also being said that the shares will be held through a statutory undertaking of the UTI on behalf of the government and the government will have the choice to convert the equity shares into preference shares at any point in time.
Tata Teleservices, which primarily offers fixed-line broadband services in Maharashtra, said it has decided to exercise both the options and the Net Present Value (NPV) of the interest payable is expected to be Rs 850 crore. In the case of Vodafone Idea, the NPV of the interest payable is expected to be about Rs 16,000 crore for which the operator has offered 35.8 per cent stake to the government.
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. However, analysts also say that it will be a tall task for Vodafone Idea to stage a comeback being on a massive debt of around Rs 1.8 lakh crore.
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