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Equity Stake of Government in Vodafone
Vodafone Idea, a key telecom player in India, risks closure thanks to its massive commercial debt and the substantial levies and penalties it owes to the government. Its exit would weaken competition and hurt exchequer revenues. The government has offered to accept equity in Vodafone Idea as part payment to mitigate this risk. With its existing equity in BSNL/MTNL, the government faces a serious confl ict of interest through ownership in competing companies. Merging these companies would help them and promote policy objectives better.
The authors thank Naveen Santoshi and Kumar Rahul for the helpful discussions. All errors that remain are the sole responsibility of the authors.
This article analyses the option given to telecom service providers (TSPs) as part of the government’s reform package, announced in September 2021, where the TSPs can turn the interest on their existing liability into equity shares to the government. The government realises the need to preserve competition in the Indian telecommunications sector that witnesses an impending concentration due to wrong policies.1 While the government has finally woken up to the imperative of ensuring optimal competition in this growing market, the suggested solution merits scrutiny in terms of its actual effects on the industry.
The Background
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