Lagatar24 Desk
New Delhi, Jan 11: On Tuesday, Vodafone Idea announced that it had chosen to convert the interest on spectrum and adjusted gross revenue (AGR) dues into government stock. Following the judgement, the government will own around 35.8% of Vodafone Group, while promoter shareholders will own approximately 28.5 percent and 17.8 percent of Aditya Birla Group.
“The conversion will therefore result in dilution to all the existing shareholders of the Company, including the Promoters. Following conversion, it is expected that the Government will hold around 35.8% of the total outstanding shares of the Company, and that the Promoter shareholders would hold around 28.5% (Vodafone Group) and around 17.8% (Aditya Birla Group), respectively,” said the company in a statement.
The government announced a telecom reform package last year in an attempt to save the cash-strapped telecom industry. According to the package, the Department of Telecommunications (DoT) provided various options to the operators on October 14, 2021, including deferment of spectrum auction payments due up to four years, a one-time opportunity to opt for deferment of AGR related dues as determined by the Supreme Court by four years, and a one-time opportunity to pay interest for the deferment period on the deferred spectrum instalments and AGR dues by way of conversion into cash.
Vodafone Idea decided to convert the full amount of such interest connected to spectrum auction instalments and AGR Dues into equity at its board of directors meeting on January 10, 2022. According to the Company’s best estimates, the Net Present Value (NPV) of this stake will be around Rs.16,000 crore, pending to confirmation by the DoT.
“Since the average price of the Company’s shares at the relevant date of 14.08.2021 was below par value, the equity shares will be issued to the Government at par value of Rs. 10/- per share, subject to final confirmation by the DoT,” informed Vodafone Idea.
With this move, Vodafone Idea has become the first and only carrier to agree to a four-year moratorium and equity conversion. Bharti Airtel chose the moratorium over the equity conversion, while Reliance Jio chose neither option. The corporation has paid the government Rs. 7,854 crore in dues so far, but it still owes the government almost Rs. 50,000 crore.
Following the news, Vodafone Idea’s stock dropped 19 percent, reaching an intraday low of Rs 12.05 on the BSE, a drop of 18.86 percent.
According to the company, the Board of Directors has taken note of the proposed changes to the existing Shareholders Agreement (SHA) and has authorised its execution, as well as recommended revisions to the Articles of Association (AoA) to give effect to the changes in the SHA.
“The governance and other rights of the Promoter shareholders are governed by a Shareholders Agreement (SHA) to which the Company is a party and are also incorporated in the Articles of Association of the Company. The rights are subject to a minimum Qualifying Threshold of 21% for each Promoter group, and in light of the conversion of interest into equity, the Promoters have mutually agreed to amend the existing SHA for reducing the minimum Qualifying Threshold from 21% to 13% for the purpose of exercising certain governing rights e.g. appointment of directors and relating to appointment of certain key officials etc,” said the company.
