CALL ON HOLD

The jury is out on whether the Union government should artificially prop up Vodafone Idea, a struggling private company

- Yuthika Bhargava

For the better part of the past decade, Vodafone Idea (Vi)—once a telecom heavyweight—was written off as a sinking ship as it battled mounting debts and eroding subscriber base. Yet it continues to stay afloat—not due to its market performance but a series of life-support doled out by the government.

Now, with the government becoming the single largest shareholder in the company with nearly 49% stake, the question looms: is saving Vi worth the effort, and does the company have any realistic chance of revival?

At the end of March, this year, Vi announced that the Ministry of Communications has decided to convert some of its outstanding spectrum auction dues worth Rs 36,950 crore payable between 2025-26 and 2027-28 into equity shares.

With this, the Centre—policymaker and the company’s largest creditor—now holds almost 49% stake in the company.

The equity conversion was the second instance of the government agreeing to pick up equity in the debt-ridden telco. In February 2023, the government had agreed to convert the interest arising from deferment of AGR and spectrum instalments worth about Rs 16,130 crore into equity.

The government has stressed that the measures were to ensure a competitive telecom sector with three private players, along with state-run Bharat Sanchar Nigam (BSNL). Allowing a third player to die would not only harm the government's chances of recover-ing its dues but also hurt consumer interests by reducing competition and potentially creditor banks.

While the move has been largely welcomed citing that the government had no other option, critics have raised the question whether the government is artificially propping up competition and should it act as a stakeholder in a struggling private business?

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