Good money after bad

A permanent govt crutch for Vodafone Idea is not the best way to avoid a duopoly in telecom

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The government's decision to convert ₹36,950 crore of Vodafone Idea's spectrum dues into equity, raising its stake to 49%, fits squarely within the telecom reforms package of September 2021 and offers the struggling telecom operator a temporary lifeline.

It eases the immediate liquidity pressures as the four-year moratorium on payments ends in September. Earlier, in February 2023, the government had converted ₹16,133 crore of interest dues into equity and became the company's largest shareholder. Later a ₹18,000-crore follow-on public offer diluted the government's stake to 22.6%.

The latest move no doubt provides a breathing room to the company, covering ₹28,000 crore of FY26 dues and a part of the ₹43,000 crore due in FY27. But it also raises fundamental questions about VIL's future and the government's role in a market economy.