The board of Vodafone Idea Ltd. has approved the conversion of AGR dues and spectrum interest into equity, leading to the government becoming a nearly 36% stakeholder in the telecom company. "It is now informed that the Board of Directors, at its meeting held on January 10, 2022, has approved the conversion of the full amount of such interest related to spectrum auction instalments and AGR Dues into equity," the company announced in a filing to BSE. Following conversion, it is expected that the government will hold around 35.8% of the total outstanding shares of the company, while the promoter shareholders, Vodafone Group and Aditya Birla Group, will hold around 28.5% and around 17.8% of the company, respectively.
Vodafone Idea shares fell nearly 19% today, to Rs 12.05 apiece on the NSE, before partially recovering losses. The net present value of interest is expected to be about Rs 16,000 crore, following final confirmation by the Department of Telecommunications, the company said. The equity shares will be issued to the government at a par value of Rs 10 per share.
This reform by the government to provide an option to monetise interest portion of the AGR and spectrum dues for 4 years was targeted for Vodafone Idea given the company is facing such a cash crunch situation, Nitin Soni, Senior Director, Corporates at Fitch Ratings, told CNBC TV18. This will provide some cash flow relief to the company, and help them to expand their 4G spectrum, he added.
However, Soni said the company is not investing enough in capex and needs fresh equity investments. Soni noted that it will be challenging for any new investors to put money into Vodafone Idea because rivals Bharti Airtel and Reliance Jio have strong balance sheets now. "In the next 12–18 months, the situation will rapidly change, and the delay at Vodafone Idea in finding fresh equity investments will further weaken their competitive market position. Overall, in the short term, I don’t see any big investors putting their money into the telcos, "he said.
The development comes as rival Bharti Airtel said it would not issue equity to the government and agreed to pay the interest on deferred spectrum and adjusted gross revenue liabilities last week. In October, DOT offered a relief package to telecom firms with various options for the telecom companies to clear their dues. One of the offers was an option to defer payment of spectrum auction installments and AGR related dues by four years. Both Vodafone Idea and Airtel accepted that offer.
The relevant date for pricing of equity shares would be August 14, 2021. "The company said the price shall be equal to the higher of the average of the weekly high and low of the volume weighted average price of the equity shares during the last 26 weeks preceding the relevant date or two weeks preceding the relevant date.
The adjusted gross revenue (AGR) of the telecom industry rose 4.24% sequentially to Rs 53,510 crore for the July-September 2021 period, primarily on the back of increased mobile revenues by the operators, The Financial Express reported earlier today. The access services, or mobile services AGR, of all private telcos—Bharti Airtel, Reliance Jio, and Vodafone Idea—rose during the period, while that of state-run BSNL dropped, showed data released by the Telecom Regulatory Authority of India (Trai).