Government's Strategic Move in Vodafone Idea

The Indian government has agreed to significantly increase its stake in Vodafone Idea, converting outstanding spectrum auction dues worth Rs 36,950 crore into equity. This move will elevate the government's shareholding from 22.6% to approximately 48.99%, making it the largest single shareholder in the debt-laden telecom operator.

Operational Control Remains with Promoters

Despite the government's increased stake, the promoters will continue to have operational control of the company. Vodafone Idea has been directed to issue 3,695 crore equity shares at a face value of Rs 10 each within 30 days, following the necessary regulatory approvals.

Vodafone Idea's Financial Struggles

Formed in 2018 through the merger of Vodafone India and Idea Cellular, Vodafone Idea has been facing financial distress due to massive debts, intense competition, and hefty Adjusted Gross Revenue (AGR) dues imposed by the Supreme Court. The company's CEO recently requested the Department of Telecommunications to approve equity conversion for pending dues, highlighting the company's inability to meet certain financial obligations.

Government's Relief Package

In 2021, the government introduced a relief package allowing telecom companies to convert their dues into equity. Vodafone Idea opted for this, leading to the government acquiring a 33% stake in 2023 by converting over Rs 16,000 crore in dues. However, the company's financial challenges persist.