Vodafone Idea CEO Makes Urgent Appeal to DoT for Rs 36,950 Crore Debt-to-Equity Conversion
In a critical move that underscores the telecom operator's financial distress, Vodafone Idea (Vi) CEO Akshaya Moondra has made an urgent request to the Department of Telecommunications (DoT) Secretary Neeraj Mittal seeking approval for converting outstanding dues into government equity. This emergency appeal aims to address the company's mounting financial challenges and regulatory payment obligations.
Desperate Plea for Financial Relief
According to reliable sources, Moondra's communication to the DoT, dated March 11, explicitly highlights Vi's inability to fulfill two significant financial obligations:
- Providing a Rs 6,091 crore bank guarantee
- Making a Rs 5,493 crore cash payment related to shortfalls from the 2015 spectrum auction
The CEO has specifically requested the telecommunications department to refrain from taking punitive actions against the company given its precarious financial position. This plea comes at a critical juncture as Vi faces increasing regulatory payments amidst ongoing financial struggles.
Massive Equity Conversion Proposed
The centerpiece of Moondra's proposal is the conversion of Rs 36,950 crore of outstanding dues into equity, calculated on a net present value (NPV) protected basis. This conversion would address multiple outstanding obligations, including:
- Adjusted Gross Revenue (AGR) dues
- Spectrum auction dues from 2012
- Spectrum auction dues from 2014
- Spectrum auction dues from 2015
- Spectrum auction dues from 2016
This proposal is being made under the framework of the 2021 Telecom Reform Package, which was specifically designed to provide relief to the struggling telecom sector.
Significant Government Stake Increase
If approved, this equity conversion would dramatically increase the government's ownership in Vodafone Idea from the current 22.6% to approximately 49%. This calculation includes a proposed conversion of Rs 13,809 crore specifically related to the 2015 spectrum payment obligations.
In his communication, Moondra reportedly requested "support for equity conversions up to the threshold of government of India shareholdings at 49%, that is, an amount of Rs 36,950 crore on NPV protected basis, subject to customary approvals at our end."
Market Valuation Considerations
An important financial consideration in this proposal is the current market valuation of Vodafone Idea. At the company's present market capitalization of approximately Rs 54,401 crore, a 49% stake would be valued at around Rs 26,656.5 crore.
This creates a potential discrepancy between the requested conversion amount and the actual market value of the resulting equity stake, adding another layer of complexity to the DoT's decision-making process.
Critical Decision for Vi's Future
The telecom department's response to this request will be crucial for Vodafone Idea's survival prospects. The situation has been further complicated by the recent stalling of a proposal to waive AGR dues, which has significantly impacted the financially strained telecom operator.
As of now, Vodafone Idea has not responded to requests for comment on this development. Industry analysts are closely watching this situation, as the outcome could determine whether India's telecom market remains a three-player sector or consolidates further.
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