Vodafone PLC, ABG may infuse Rs. 10,000 crore in Vodafone Idea: Report

Vodafone PLC and Aditya Birla group - the two promoters of Vodafone Idea - may finally infuse fresh equity in the telco. A report by Financial Express, citing DoT officials, said that the promoters may infuse up to Rs. 10,000 crore.

Vodafone Idea Finally Getting Equity

For a long time, both the promoters refused to infuse any fresh equity in the company. As such, the telco has face significant financial issues, and has been losing customers constantly. Also, the telco has been unsuccessfully trying to raise Rs. 25,000 crore for the past year or so.

However, the mood has changed at the telco after the government announced the telecom relief package. After the relief package has been implemented, the telco will see cash flow relief of upwards of Rs. 1 trillion. This has uplifted the mood at the telco, and as a show of their commitment towards making sure the telco survives, the co-promoters will seek to infuse the said equity.

The package includes excluding non-telecom revenue from AGR, 100% FDI through automatic route. More crucially, the package included the option to get a four-year moratorium on statutory dues. So far, the DoT has not released the guidelines for the same.

Vodafone Idea - What are the Options?

The two co-promoters - Vodafone Plc and ABG, hold 44.39 % and 27.66% stake in Vodafone Idea, respectively. As per Ravinder Takkar, the two co-promoters have invested more than Rs. 1,90,000 crore into Vodafone Idea in the last 10 years.

There are a few things from now, that Vodafone Idea can do.

If the telco goes for the moratorium route, it also has the option to convert its debt to equity. This would make the government a stakeholder in the telco. Jefferies had said the moratorium "could lead to the government taking up sizable stake in VIL". If the telco looks to pay its Rs. 9,000 crore interest through equity, the government can end up owning 26% stake in the telco, at its current market value.

However Ravinder Takkar had said that the government isn't interested in owning any telcos. In a recent press address, he said, "... the government has no interest in owning any additional telecom companies in the country. They have no intent of running any other company. They have said it very clearly to us that you guys are the experts at running this, they want us to run and we are competitive in the market and provide support to customers”.

However, if the telco manages to get back on track, and raise funds as intended, the picture can look different. Along with the Rs. 25,000 crore, along with the fresh equity from the co-promoters, the telco can invest capex in its 4G networks, and prepare well for 5G. Things might just turn out fine for the telco, if everything goes as planned.