The government has said that the three telcos it will get equity stakes in by converting the interest on past statutory dues won’t be turned into public-sector undertakings (PSU) and that the companies would continue to be ‘professionally run’ private firms. It has also said that the Centre can sell these shares at an appropriate time and realise the amounts due.
A day after investors voiced concerns over the future of
becoming a PSU, the Department of Telecommunications (DoT) issued a series of frequently asked questions (FAQs), clarifying that neither was the government paying anything to acquire the shares, nor was it going to turn these telcos into a PSU.
The clarification by the government came a day after Vodafone Idea informed the stock exchanges that it had opted to convert interest on adjusted gross revenue (AGR) and spectrum dues into government equity of around 35.8%, making it the single largest shareholder in the cash strapped telco.
Vodafone Idea’s shares had plunged over 20% on Tuesday but recovered to close 8.47% higher to close at Rs 12.8 on Wednesday.
“While, three companies have exercised the option of converting liabilities into equity/preference shares. They have offered this option to the government in lieu of their liabilities,” the statement said.
Maharashtra and its unlisted sister entity, Tata Teleservices, are the three companies which have opted for conversion.
The clarification said that some companies (read: Bharti Airtel) have opted not to convert their liabilities into equity/preference shares.
The FAQs further explained that the telecom relief package announced on September 15 last year was done to stop the telecom industry from shrinking into a duopoly or a monopoly. “Such potential lack of competition could lead to higher prices and poor services”, DoT has said, adding that enough competition in the market safeguards the interests of the common man.
“Government is not paying anything to acquire the shares of any TSP (telecom service provider). Certain dues payable by some of the TSPs are being converted to equity/preference capital in these companies based on options exercised by them as per the Telecom Reforms Package announced on September 15th 2021”, the FAQs explained.
Delving into the logic for allowing conversion, the government has said that with conversion of liabilities into equity/preference shares, the sector has got back the ability to invest and provide better services. Companies also retain the ability to invest so that telecom services can reach far-flung areas.
The government had unveiled a telecom relief package last September in order to mainly save Vodafone Idea from bankruptcy. While allowing a deferral of AGR and spectrum payment dues to the government by four years, it gave an option to telcos to swap the interest arising on the deferral at the net present value to the government with a stake in the company.
Prior to the package in June last year, Kumar Mangalam Birla, chairman of the Aditya Birla Group and at that time of Vodafone Idea as well, had written to the government that the telco won’t survive unless the government provides some relief, and had even offered to give up the ABG stake in the loss-making telco to a state-owned entity which could help revive the company.