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vodafone idea: Govt option? Part telco interest dues as equity

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NEW DELHI: The government has discussed the option of converting a portion of the interest quotas of mobile phone companies into equity instruments as part of a broader solution to solve the financial mess of telecommunications, which will likely be assumed by the Union Cabinet very soon in view of Vodafone ideaStressed finances.
The proposal being discussed includes extending the moratorium on spectrum payments for companies for a few years and, thereafter, converting the part of the interest, which will be charged to maintain the net present value (NPV) of the pending , in share capital, while companies have the mandate. to return the capital in full, the sources said.
A new interruption in payments for the purchase of spectrum, beyond the two-year holidays, which end at the end of this fiscal year, will be a relief for the sector, especially for Vodafone Idea, which is facing a serious crisis of Liquidity in view of the company’s debt amounting to Rs 1.7 lakh crore.

The government believes that the survival of Vodafone Idea is important not only to maintain proper competition in the telecommunications industry and avoid a duopoly (with Reliance Jio and Airtel as sole private operators), but also to save its own interests as a large part of the outstanding balance of the company goes to the treasury, which would be suspicious in case it is declared bankrupt.
To convert interests into shares, SebiThe preferential allocation guidelines will be followed in the case of listed companies such as Vodafone Idea and Bharti airtel.
The sources said the detailed modalities of the share conversion are likely to be complex with various operational issues to be worked out jointly by the finance ministry, the telecommunications department, Sebi, as well as other relevant players.
The sources added that the proposal also states that the government, in its sole discretion, may also decide to circumvent the share conversion route and would prefer to opt for exchangeable preferred shares (which may or may not be convertible), in whole or in part. In the past, the government has steered clear of such transactions and it remains to be seen whether the proposal will eventually be accepted.
In a letter to Cabinet Secretary Rajiv Gauba on June 7, the industrialist Kumar Mangalam Birla (whose group has a 27% stake in Vodafone Idea) offered its stake to the government or any other entity it deems appropriate to ensure its survival.





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