The Indian government’s stake in Vodafone Idea has surged to just under half of the company’s equity, following the conversion of debt into shares. This strategic move sees the conversion of INR369.5 billion (about $4.3 billion) that Vodafone Idea owed, increasing the government’s stake from 22.6% to 49%. This is part of a broader government relief package implemented in 2021 to salvage the struggling telecom sector.
Vodafone Idea has been grappling with a massive debt burden, totaling approximately $25 billion, the majority of which is attributed to spectrum dues owed to the government. The conversion of these dues into equity represents a lifeline for the beleaguered telco. Analysts suggest this move can enhance the company’s cash flow by an estimated INR400 billion ($4.67 billion) over the forthcoming three years.
Despite this relief, Vodafone Idea remains a distant third in the intensely competitive Indian telecom market, trailing behind rivals Reliance Jio and Bharti Airtel. Both competitors have a significant edge due to their earlier adoption and deployment of 5G technology. Jio and Airtel outpaced Idea by launching 5G services in 2022, attracting over 250 million subscribers combined. Meanwhile, Vodafone Idea was only able to debut its 5G services recently, focusing instead on expanding its 4G network.
This marks the second instance of government conversion of Vodafone Idea’s debts into equity, following an earlier conversion of INR161.3 billion ($1.95 billion) in interest owed back in 2023. These shares initially raised the government’s stake to 33%, but subsequent dilution during a $2.16 billion public offering reduced it to 22.6% before this current increase.