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Govt to convert debt into equity in Vodafone Idea before 5G spectrum auction: Report

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20th June, 2022 09:33 IST
The government will convert its debt into equity in Vodafone Idea ahead of 5G auctions scheduled from July 26, according to a Financial Express report.

After the equity conversion, the government will hold a 32% stake in the financially stressed telecom operator, while promoters’ holding will dilute to 50% from 75%.

“The decision of the government to convert the interest of Rs 16,133 crore into equity will be notified to the company and the company’s board will accomplish this in 2-3 weeks time,” a senior government source told the publication.

The equity conversion will be done under Section 62 (4) of the Companies Act. The report added that the telco will issue shares to the government on a preference basis, which will be held by the Department of Investment and Public Asset Management (DIPAM).

'Spectrum auction to see limited bidding'

“Don’t expect a bidding war. 330Mhz of the mid band spectrum of 3300MHz is available in every circle and an operator requires only 100Mhz for pan India roll out. This means more than adequate spectrum is available for the three operators,” JP Morgan said in a note.

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The equity conversion is seen as crucial to the telco’s participation in the upcoming 5G spectrum auction. So far, its promoters Vodafone Group Plc and the Aditya Birla Group have infused Rs 4,500 crore in the telco, and the company needs to raise Rs 20,000 crore more.

This year in January, Vodafone Idea’s board informed the Department of Telecommunications (DoT) that it will opt for converting the interest on its adjusted gross revenue (AGR) and spectrum dues into government equity. The net present value (NPV) of this equity is expected to be about Rs 16,133 crore.

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