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  • The government does not desire to take over the operations of Vodafone Idea after it gets a 35.8% stake for converting debt to equity.
  • The existing promoters are fully committed to managing and running the company’s operations.
  • “They want three private players in the market, they do not want duopoly or monopoly,” VIL CEO said.

Ravinder Takkar, Vodafone Idea’s CEO on Wednesday said that the government had made its position amply clear that it does not want to run the telco, and added that existing promoters are fully committed to managing and running the company’s operations. This comes a day after it opted to convert interest on dues to government equity.

Vodafone Idea (VIL) on Tuesday announced its decision to opt for converting about Rs 16,000 crore interest dues liability payable to the government into equity, which will amount to around 35.8 per cent stake in the company.

If the plan goes through, the government will become the biggest shareholder in the company which is reeling under a debt burden of about Rs 1.95 lakh crore.

VIL Managing Director and CEO Ravinder Takkar told reporters in a virtual briefing that there is no condition in the Telecom Department’s letter on equity conversion option, which allows for board seats for the government. The existing promoters are fully committed to managing and running the company’s operations, he asserted.

“In all of our interactions with the government leading up to the package and even after the announcement of the package, it has been clearly stated by the government that they do not want to run the company. They do not have the desire to take over operations of the company… They want three private players in the market, they do not want duopoly or monopoly,” VIL CEO said.

The government has “made it clear they want promoters of this company to run it going forward”, he said, adding that VIL expects no change in their position.

Takkar further said he expects the entire process to conclude in the coming months.

On the rationale for the decision, the VIL top boss said that given that most of the telco’s debt are to the government, “it was clear to us that converting some of debt to equity is a good option for the company to reduce its debt going forward”.

Credit Suisse said that despite the moratorium and equity conversion of interest during the period, Vodafone Idea will need an ARPU (Average Revenue Per User) of Rs 240 by the financial year 2026. This is required to meet Rs 33,000 crore of annual spectrum payments and AGR dues which will need to be repaid over the remaining tenure.

Its current ARPU was Rs.109 in the quarter ended November 2021.

Since the average price of the company shares with respect to the relevant date was below par value, the equity shares will be issued to the government at par value of Rs 10 per share, he explained.

Post-conversion, Vodafone Group shareholding in the company will drop to around 28.5 per cent, and Aditya Birla Group to around 17.8 per cent.