Ravinder Takkar: Govt. Wants Promoters to Run Vodafone Idea

In a press briefing on Wednesday, CEO Ravinder Takkar said that the government does not want to run Vodafone Idea. This comes in the aftermath of the telco converting its AGR and spectrum liabilities to equity, an option provided under the telecom relief package.

Govt to Take the Backseat in Vodafone Idea?

At the media briefing, Takkar said, "the government is very clear. They want us to run the company. They want the promoters to run the company".

"I'm saying that based on a personal conversation with the government," the Vi MD and CEO added. Interestingly, he pointed out that under the telecom relief measures taken by the DoT, there is no provision that allows the government a seat at the board of a telco. Therefore, even though the government remains the largest stakeholder in Vi, it will not take over from the promoters. Takkar reinstated that ABG and Vodafone Plc will continue to run the company. Along with that, he added that the promoters have accepted the significant dilution of their stake that came with the conversion.

After the telco went ahead and converted its debt to equity, the government became the largest stakeholder in the company. With this, the government will own about a 35.8% stake in Vi, while Vodafone Group will hold 28.5%, while ABG will hold about 17.8%. The telco will issue equity shares to the government's special undertaking SUUTI. Takkar added that the telco will issue equity shares on a preferential basis. He further notified that the conversion will complete within the next few months.

A Missed Opportunity for the Government?

At the media briefing, Takkar also noted that throughout Vodafone Idea's efforts to raise funds, the investors asked three questions.

• Does the government want three private players in telecom?
• Will the government support reform in the sector?
• Will the government support via liquidity/financing of the sector?

The government did the first two in September last year, with the relief package packed full of reforms. With this move, the government checked the third box as well. However, it is a situation Vi found itself in because of the promoters' hesitance to infuse capital in the telco. While ABG and Vodafone Plc openly expressed their hesitation, the telco found it harder to find investors who would infuse capital. As such, the telco has struggled to compete as its Capex spending lagged behind that of Jio and Airtel.

Suffering from the constant churn and a plummeting revenue, the telco had also written to the DoT in November; it had notified the department that it won’t have enough funds to pay license fees for the 2nd, 3rd, and 4th quarter of FY22. With 5G auctions coming up within the next 3-4 months, without this move, the telco would have been unable to compete at all.

It feels as though the government has missed an opportunity to once again shine at the telecom stage. Once the "cash cow" for the government, the telecom sector has become financially dependent on it. While Bharti Airtel has continued to persevere for years, Reliance Jio has shaken up the status quo and has already sunk Vi. The government, while clearing that it does not want to run Vi, could have done well to compete in the sector.