No government stake deal in Vodafone Idea till promoters infuse enough cash: Report

Vi, which had a net debt of around Rs 2.2 lakh crore as of September-end 2022, needs around Rs 40,000-50,000 crore to sustain itself

The promoters of Vodafone Idea (Vi) are reportedly unwilling to infuse adequate capital into the struggling telco, thereby making it unviable for the government to convert the accrued interest on the deferred adjusted gross revenue (AGR) of the company into government equity.

According to a report by ET which cited senior government officials familiar with the matter, the promoters of Vodafone Idea—UK-based Vodafone Plc and the Aditya Birla Group—are only willing to infuse around Rs 2,000-3,000 crore in Vi at the moment, far short of the amount it would require to sustain the company.

Officials told the publication that Vi, which had a net debt of around Rs 2.2 lakh crore as of September-end 2022, would need around Rs 40,000-50,000 crore to sustain itself.

As it stands, Vi not only has to clear outstanding dues to vendors such as Nokia, Ericsson, ATC, and Indus Towers, as well as banks, the telco also has to roll out 5G services and expand 4G coverage to compete with the likes of Reliance Jio and Bharti Airtel to whom it has lost a considerable chunk of customers.

Even if banks are willing to fund half the amount required to sustain the telco, Vi's promoters have to provide the rest to even attract external investors, officials added.

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In 2021, the government had approved a relief package for the telecom sector which, among other measures, allowed telcos to defer payment of AGR-related dues by four years. It further allowed carriers to convert interest on such dues into government equity, something that Vodafone had opted for in January 2022.

With Vi's current accrued interest on AGR-related dues standing at Rs 16,130 crore, the conversion, if it at all happens, would give the government a 33 per cent stake in Vi, making it the single-largest shareholder in the company.

That being said, before the finalisation of the package, Vi's promoters had given assurances to the government that they would infuse Rs 10,000 crore into the company.

However, those assurances have failed to materialise as Vi only received a little over Rs 4,900 crore from Vodafone Plc and the Aditya Birla Group since January 2022, the bulk of which was used to pay off dues.

Given the state of things and the promoters' unwillingness to bankroll the funds needed for the continued operation of the company, officials told ET that the government cannot take responsibility for the struggling telco.