In a promising development for Vodafone Idea (Vi), the Indian government has taken a decisive step to ease the telecom operator’s financial strain. The government will convert an additional ₹36,950 crore of Vodafone Idea’s outstanding spectrum auction dues into equity, a move made possible by the telecom reforms package established in September 2021. This announcement was made public by the company on Sunday, marking a significant relief for the debt-laden telecom operator.

Government’s Strategic Equity Conversion

Under the new arrangement, the dues related to deferred spectrum payments, which were initially due after the moratorium period ending in September 2025, will now be resolved through the issuance of equity shares to the government. Specifically, Vodafone Idea has been instructed to issue 36,950 million equity shares at a face value of ₹10 each. This issuance is expected to be completed within 30 days, pending necessary approvals from regulatory bodies such as the Securities and Exchange Board of India (SEBI).

• Government’s Stake: Post-conversion, the government’s stake in Vodafone Idea will escalate from 22.60% to nearly 48.99%.
• Operational Control: Despite this increase, the Aditya Birla Group and Vodafone Group UK will maintain operational control of the company.

Financial Breather Ahead

This decision comes in response to Vodafone Idea’s appeal for additional conversion of dues into equity, especially as the four-year moratorium on Adjusted Gross Revenue (AGR) and spectrum dues approaches its conclusion in September 2025. Without this crucial intervention, Vodafone Idea would have faced annual payment obligations of approximately ₹40,000 crore once the moratorium expired. The recent relief provides the telecom operator with essential financial breathing space, extending their runway for at least the next 18 months.

Analysts believe that this conversion will enable Vodafone Idea to secure around ₹25,000 crore in bank debt, which they have been pursuing for some time. This influx of capital is expected to help stabilize cash flow and minimize subscriber churn.

A Pattern of Support

This latest equity conversion mirrors a previous government initiative from February 2023, when ₹16,133 crore in interest dues were similarly converted into equity, resulting in a 33% stake for the government. Following subsequent fundraising efforts, including an ₹18,000 crore follow-on public offer (FPO) anticipated in April 2024, the government’s holding had diluted to 22.6% by December 2024.

Strengthening Future Prospects

Experts suggest that the recent move will bolster Vodafone Idea’s standing, enhancing its ability to attract funding essential for its nationwide 5G rollout. As the last of the three major private telecom operators to initiate 5G services, Vodafone Idea commenced its commercial launch in Mumbai earlier this month.

With the government’s increased equity stake, lenders may be more willing to extend credit to Vodafone Idea. The company’s immediate financial responsibilities are now primarily focused on AGR payments, which total around ₹6,500 crore due in September 2025, alongside an estimated ₹13,000-14,000 crore due in September 2026.

As of December 31, 2024, Vodafone Idea’s overall payment obligations to the government are estimated at ₹2.27 lakh crore, which includes deferred spectrum payments due until FY 2044 and AGR liabilities payable until FY 2031. Analysts view this equity conversion as a pivotal move toward stabilizing Vodafone Idea’s financial situation and ensuring its continued viability in a competitive market.