The Ministry of Communications unveiled its decision to convert a portion of Vodafone Idea’s outstanding spectrum-auction dues worth ₹36,950 crore into equity, increasing its stake in the telecom company and making it a quasi-public enterprise. The support announced on March 31, 2025, has been extended as part of the 2021 Telecom Sector Reforms Package introduced to offer financial aid to the struggling players of the telecom sector. With this, the government’s stake in the company has increased to 48.99%, which earlier was 22.6%.
Will this Decision Help the Company?
The support from the government of India would cover the deferred dues that the company had to pay post the expiry of the moratorium period. If the government had not supported Vi in its struggle, the company would have ended up paying around ₹40,000 crore as an annual instalment before September 2025, the expiry date for the moratorium. This amount, in turn, would offer the company two years to settle its financial struggles and become stable.
Vodafone Idea’s performance decline has continuously been reflected in its falling share prices, and the concerns became major after the Q3 reports were revealed in December. While the revenue from operations improved by 4%, QoQ revenue increased by 1.7%, and ARPU went up by ₹7. Though the graph showed growth, the decline in the number of subscribers to 199.8 million from 215.2 million in the same period in FY 2024 indicated a further decline in the company’s performance.
Until December 2024, Vodafone Idea recorded a total debt worth ₹2.3 lakh crore, which included ₹1.4 lakh crore as the spectrum liability and ₹77,000 crore as the adjusted gross revenue (AGR). The telecom company filed a petition to the Supreme Court, seeking correction in the AGR calculation, and also asked to waive off the interest rates and penalties. When the Supreme Court rejected the appeal, Vi approached the government to help it deal with the AGR liability.
What made the Government Invest in Vodafone Idea (Vi)?
Though the telecom player capably narrowed the losses per its quarterly report released in December, its request to the government to help it deal with the liabilities became one of the reasons behind the authorities providing financial support to Vi. However, the question is whether the government is doing it for business revival or is it yet another way of nationalising another brand.
In February 2023, the government intervened with Vi and converted its interest liability worth ₹16,000 crore into equity after more than 1.5 years of discussions. This raised the government’s stake in the company to 33.1%. Later on, the stake was reduced to 22.6% from 33% when Vodafone UK provided capital support to Vi. Hence, the latest government support can be called the second lifeline offered to the company by the Indian authorities, signalling how willing the latter is to give Vi a fair chance to bounce back.
Having said that, it is important to note that this increase in the government’s stake in the company to approximately 49% will cause a drop in Vodafone UK’s stake to 16.1% from 24.4% along with the decline in the ownership of Aditya Birla group to 9.4% from 14%. Given the figures, this could also be considered as a step towards making the telecom sector a public good provider.
What does this Decision Mean for Investors?
The Vi share prices rose to 20% on April 1, 2025, post the government’s announcement as it came as a decision in favour of the company as well as its stakeholders. The price was last up to ₹8.16, which was recorded as the biggest one-day gain for the company in the last 15 months. In the last five years, the company delivered more than 116% returns, depending on the trust that the stakeholders showed from some quarters. However, over the past year, the shares dropped to 51.44%, making it a major concern for the company, the government, and the investors.
While for a few investors, the news came as a hope, some of them, especially the 58 lakh small shareholders, still seem confused and doubtful about how stable the company would become even after this investment. According to the analysts, however, Vi is on the verge of revival. Hence, stocks are more likely to start logging gains, becoming the first choice for investors, especially those with long-term portfolios.
Conclusion
While the government is the largest stakeholder in Vi, the operational control would remain in the hands of the promoters, namely Vodafone and Aditya Birla Group. With the support from the government, the telecom player has gained some confidence, the investors seem to have mixed emotions. However, if analysts are trusted, the business revival is on its way, and the company can still be trusted.
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