oppn parties Vi And Tata Teleservices Opt For Deferment, Give Stake To Government

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Vi And Tata Teleservices Opt For Deferment, Give Stake To Government

By Linus Garg
First publised on 2022-01-12 06:57:57

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

With the government getting 35.8% stake in Vodafone- Idea and 9.5% in Tata Teleservices as part of a package to bail out the stressed telcos, the companies have been relieved of the stress of making immediate payment of spectrum and adjusted gross revenue (AGR) dues and the interest arising out of such deferment has been paid as equity to the government. The government has clarified that despite being the majority shareholder in case of Vodafone-Idea it would not interfere in the working of the company and would not, for now, seek a place on the board. It said it would exit the companies after their operations stabilized.

This is the correct way forward given that a decision to allow the telcos to offer the interest portion as a stake to the government was part of the bailout package. Since telecom is a priority sector and has national security considerations, a company as big as Vodafone-Idea that commands a 23.07% market share, cannot be allowed to go under. But the big question remains that even after the bailout, will Vodafone Idea survive as both the promoters have indicated that they are unwilling to pump in more capital. That huge funding is required immediately is known to all as the 5G spectrum auction is coming up and technology is evolving very fast, requiring companies to invest heavily in new and better equipment to compete in the market place. Although tariffs have been hiked recently, they would barely cover day to day operational costs.

The shares of Vodafone Idea slumped 21% on Tuesday, although they had recovered by 10% on Wednesday till the time this article was written. Market experts said that since the government would get the shares at Rs 10, the valuation was locked. Also, they argued that the liability has only been deferred for four years and there has been no reduction as such. These factors work against the company and the market is not enthused by the arrangement.