In a significant relief for debt-ridden Vodafone Idea (Vi), the government has decided to convert an additional Rs 36,950 crore of the telecom operator’s outstanding spectrum auction dues into equity. This move comes under the provisions of the September 2021 telecom reforms package, the company informed the exchanges on Sunday.
The dues, which include deferred spectrum payments that were otherwise payable after the expiry of the moratorium period in September 2025, will now be settled through the issuance of equity shares to the government. Vodafone Idea has been directed to issue 36,950 million equity shares at a face value of Rs 10 each, within 30 days of obtaining necessary approvals from regulatory authorities such as the Securities and Exchange Board of India (Sebi).
Following this conversion, the government’s stake in Vodafone Idea will rise from 22.60% to approximately 48.99%, but the promoters, Aditya Birla Group and Vodafone Group UK, will continue to retain operational control over the company.
This decision follows Vodafone Idea’s request for further conversion of dues into equity, as the four-year moratorium on adjusted gross revenue (AGR) and spectrum dues nears its end in September 2025. Without this intervention, Vodafone Idea would have had to pay around Rs 40,000 crore annually once the moratorium expired. The additional relief now provides the telecom operator with a much-needed financial breather, at least for the next 18 months.
“The conversion will help Vodafone Idea raise approximately Rs 25,000 crore in bank debt, which it has been seeking for a while. This will assist in stabilising its cash flow and reducing subscriber churn,” analysts said.
This latest equity conversion follows a similar move in February 2023, when the government approved the conversion of Rs 16,133 crore in interest dues into equity, taking a 33% stake in Vodafone Idea. Subsequent fund raising, including an Rs 18,000 crore follow-on public offer (FPO) in April 2024, diluted the government’s holding to 22.6% by December 2024.
Analysts said this latest move will strengthen Vodafone Idea’s position, making it easier for the company to secure funding for its pan-India 5G roll out. The company, which was the last of the three private telecom players to launch 5G services, began its commercial 5G rollout in Mumbai earlier this month.
With the government’s increased equity stake, banks may be more inclined to lend to Vodafone Idea, as its immediate financial obligations are now limited to AGR payments, which stands at around Rs 6,500 crore due in September 2025 and another Rs 13,000-14,000 crore in September 2026.
As of December 31, 2024, Vodafone Idea’s total payment obligations to the government stood at Rs 2.27 lakh crore, comprising deferred spectrum payments due until FY 2044 and AGR liabilities payable until FY 2031. Analysts see this equity conversion as a crucial step toward stabilising Vodafone Idea’s financial health and ensuring its continued survival.