Birla group willing to exit stake in Vodafone Idea

In a letter to the Cabinet Secretary, Kumar Mangalam Birla has agreed to transfer his 27% stake in Vodafone Idea to the government as a final effort to save the company from a likely collapse. Both the principal shareholders of Vodafone Idea, the AV Birla group and Vodafone UK, have expressed their inability to infuse further capital into the company. The only way out is a government sponsored initiative to save the company.

Vodafone reported a net loss of Rs.7,023 crore in the latest quarter and has virtually eroded its net worth with the consistent losses reported. What the government would be really worried about is the Rs.180,000 crore of dues from Vodafone. This includes the debts owed to banks as well as Rs.58,000 crore of AGR charges and Spectrum dues to the Department of Telecommunications (DOT).  Apart from the loss to banks, there are also thousands of direct and indirect jobs that are at stake.

Last year, Vodafone UK and Birla Group had tried hard to find an investor to infuse Rs.25,000 crore into Vodafone through a mix of debt and equity. However, investors were unwilling to infuse funds into Vodafone Idea unless there was clarity on the AGR charges front. With most of the options closed, the Birla group is willing to transfer its stake to the government or a government sponsored institution which could save the company and thousands of jobs.

Vodafone had been badly hit by the price war in telecom that started with the entry of Reliance Jio in 2016, forcing it to merge with Idea Cellular. But the merger only compounded problems as Vodafone continued to steadily lose customers in the midst of tepid ARPUs.