Vodafone Idea managing director and CEO Ravinder Takkar said on Wednesday the government had indicated to the telecom company, it would neither participate in the management nor nominate board members. Takkar added the existing promoters are committed to the company.
The articles of association, Takkar said, have been amended to give voting rights to shareholders with a stake of over 13%. This would enable the promoters to participate in decision-making even if their stake fell to under 21%, as in the case of Aditya Birla Group whose stake will go down to 17.8%.
Speaking to reporters, Takkar said, “In all of our interactions with the government, leading up to the package itself and even after the announcement of the package, it has been very 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… the government has been very clear, they want us to run the company and that’s what we intent to do going forward.”
VIL has explained to the department of telecommunications (DoT) the calculations for the conversion of equity. Once DoT approves this, the shares will be issued to the government with the exercise expected to be completed in the coming months. After the conversion, government will become the single-largest shareholder in the company with a stake of 35.8%.
“There is no condition in the letter that DoT has written to us, in the option that we have chosen to convert this interest into equity which allows for a board seat for the government of India. So in that regard, I just want to emphasise again that the government has shown no intention to nominate a board member and we don’t expect any board members so again the board of the company will continue operations as they have been doing in the past,” Takkar said.
He further said that fund-raising plans would continue as investors’ concerns have been addressed by the government. Both sets of promoters, Takkar said, committed to the business and involved in decision-making.
“They are participating in all the decision-making and I can commit they will continue to do that. They have accepted a significant dilution to support the balance sheet of the company which shows strong commitment that they want the company to stay healthy,” he added.
On why Vodafone Idea availed the option of conversion, Takkar said, the company has significant amount of debt and a stretched balance sheet and this option to convert that debt into equity was considered positive for the company, considering the fact that most of the debt is to the government.
Loss-making and financially-constrained Vodafone Idea, which is the country’s third-largest telecom operator has total AGR dues of Rs 58,254 crore, of which it has paid Rs 7,854 crore.
As is known, Bharti Airtel has opted for the four-year moratorium on payment of AGR and spectrum dues but not for conversion of interest into equity by the government. Reliance Jio has opted for neither of the provisions, which were part of the September 15, 2021, package offered by the government to the telecom operators.
Annual instalments before the government’s relief package for Vodafone Idea amounted to Rs 15,000 crore for spectrum and Rs 9,000 crore for AGR, which came to a total of Rs 96,000 crore for four years. With this amount now deferred, and interest on deferral converted to equity, total interest comes to Rs 19,500-20,000 crore, assuming an 8-9% interest rate and the present value of this comes to Rs 16,000 crore.