Birla is reportedly ready to give Vodafone Idea to the Indian government

Birla is reportedly ready to give Vodafone Idea to the Indian government
Kumar Mangalam Birla, Chairman, Aditya Birla GroupBCCL
  • The Indian billionaire with a 27% stake in the telecom operator has reportedly written to the government.
  • In a letter to the government, Birla said potential investors want to see ‘clear government intent’ to have a three-player telecom market.
  • Vodafone Idea’s current market capitalisation stands at ₹24,000 crore, which means Birla’s 27% stake is worth ₹6,500 crore.
Kumar Mangalam Birla, one of the promoters of the beleaguered telco Vodafone Idea, has offered to give up his 27% stake in the company to help it stay afloat.

Post the merger of Vodafone and Idea, Birla owns a 27% stake in the telco, while Vodafone Plc., owns a 44% stake. At the current market capitalisation of around ₹24,000 crore, Birla’s stake is worth ₹6,500 crore.

The shares of Vodafone Idea had gained a little over a percent at 1:50 p.m on August 2 (Monday). The stock has lost over a quarter of its value since the start of the year.

Birla is reportedly ready to give Vodafone Idea to the Indian government
Vodafone Idea share price over the last one monthBSE / Business Insider India / Flourish

In a letter to the Union Cabinet Secretary, Rajiv Gauba, Birla reportedly said he is willing to give up his stake in Vodafone Idea to any state-owned or a domestic financial entity, provided the entity wants to continue operations of Vodafone Idea as a going concern.

“It is with a sense of duty towards 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity-public sector/government/domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in his letter.

Going concern refers to a business that has the assets to meet financial obligations when they fall due.

Vodafone Idea is currently saddled with a debt of ₹1.8 lakh crore, a third of which is due to deferred spectrum license fee, and levy on recalculated revenue from the past to include income from non-telecom operations.

Earlier last month, the Supreme Court refused to give the telco a discount on its retrospective dues, which amount to over ₹50,000 crore. This, combined with deferred spectrum dues of ₹8,292 crore means the company needs funds right now – even though nothing seems to be coming.

Back in September 2020, Vodafone Idea’s board had announced plans to raise up to ₹25,000 crore through debt and equity. Nearly a year later, the plans are yet to yield any results.

The lack of government support seems to be keeping investors at bay, which is something that Birla touched upon in his letter.

“To actively participate in the fund raising, the potential foreign investors want to see clear government intent to have a three-player telecom market (consistent with its public stance) through positive actions on long-standing requests such as clarity on AGR liability, adequate moratorium on spectrum payments and most importantly, a floor pricing regime above the cost of service,” he said.

“In the absence of definitive steps in this regard, the potential investors have understandable hesitation to invest,” he added further.

The government is also considering, according to reports, a slew of long-term measures to help the telecom sector. It may be willing to rewrite the rules to exclude ‘non-telecom’ revenue from the licence agreements, and allow telcos to surrender unused spectrum for a small penalty.

However, it will not affect Vodafone Idea’s present dues and the current financial health. The last word on the issue is yet to be spoken.


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