Vodafone-Idea share price jumps 15%, Google mulls 5% stake buy in cash-strapped telco

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Published: May 29, 2020 10:08 AM

Struggling telecommunications firm Vodafone-Idea saw its share price jump 15% in the initial few minutes of trade on Friday as investors reacted to the news of internet giant Google considering a 5% equity stake buy in the company.

Vodafone Idea's AGR liability stands at around Rs 58,000 crore.Vodafone Idea’s AGR liability stands at around Rs 58,000 crore.

Struggling telecommunications firm Vodafone-Idea saw its share price jump 15% in the initial few minutes of trade on Friday as investors reacted to the news of internet giant Google considering a 5% equity stake buy in the company. Vodafone Idea stock has been hammered on Dalal Street severely in the last one year, falling over 56% till yesterday. Google, although talks are in very early stages as reported by The Financial Times, could see itself battling Mark Zuckerberg’s Facebook if it invests in Vodafone-Idea. The stock was trading at Rs 6.65 per share on NSE.

Vodafone-Idea — the joint venture between UK-based Vodafone and India’s Aditya Birla Group — has been struggling to stay afloat after the Supreme Court of India refused to budge on the demand that telecom operators pay their Adjusted Gross Revenue (AGR) dues. For Vodafone-Idea the amount, as calculated by the Department of Telecommunications, stands at Rs 58,000 crore. Kumar Mangalam Birla, the Chairman of Aditya Birla Group had earlier this year said that the company might ‘shut shop’ after the AGR ruling by the Supreme Court while Vodafone refused to inject more funds into the Indian venture and also wrote-off the entire value of its Vodafone-Idea stake. The firm’s self-assessment puts the AGR dues figures at Rs 21,533 crore of which the company had paid Rs 6,500 crore till the middle of March.

The investment will not just save the cash-strapped Vodafone-Idea but will also pit Google against Facebook, which has recently invested Rs 43,574 crore in Mukesh Ambani’s telecom venture Reliance Jio for a 10% equity stake. With the growing user base of mobile internet data in India, the two internet giants could battle for supremacy. 

India’s telecom industry is witnessing a three-horse race currently, with Bharti Airtel and Reliance Jio fighting for the top spot and Vodafone-Idea lagging behind for quite some time now. India’s richest man Mukesh Ambani has stepped up his game as he targets the number one spot. Ambani has roped in $10 billion or Rs 75,000 crore in a month’s time from foreign investors for Jio Platforms Limited. Among investors who have picked up a stake in Jio are — Facebook, KKR, General Atlantic, Vista Equity Partners, and Silver Lake. The attractive telecom space in India which is still to chart many milestones is seeing more and more internet mobile data usage during the nation-wide lockdown.

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