A company with a negative net worth giving away equity is not a matter of celebration. It’s also not an anomaly in the business world.

On 7 February, Vodafone Idea gave away a 33% stake to the Indian government, which converted part of its dues (interest on interests) into equity. With that, the government became the single-largest shareholder in a company whose net worth stood at -Rs 84,404 crore (US$10 billion) in the quarter ended December 2022.

Since then, there’s been a consensus among media outlets—and to an extent rightly so—that equity conversion will not save the telco. However, there’s a difference between being a thriving entity and being stuck in a coma vigil. 

“We never said we were going to save Vi. What we did was bring sectoral relief. [We] offered [the dues-to-equity conversion] to everyone. Vi opted for it; Jio and Airtel didn’t,” said a senior official close to the department of telecommunications (DoT). “Look at the pointlessness of the [media] criticism about the so-called delay in the approval of equity conversion,” he continued, “we converted dues, and the share prices of Vi are still falling.”

At last

The government approved the conversion of Vi’s dues into equity at Rs 10 (US$0.12) per share. The current market value of Vi's shares hovers around Rs 7 (US$0.09)

The point the bureaucrat was driving home was that the government’s aim was to allow Vi to “survive” with some “relief”, but it needed other chips to fall into place. “…The markets are waiting for the banks to put in money,” he said. 

The officials, analysts, and executives in the story declined to be named as they don’t want to be seen publicly commenting on the matter. 

On its part, the government took nearly 15 months for this equity conversion from when it laid out laid out Economic Times Government announces major telecom reforms package Read more  a telecom reforms package in October 2021. DoT officials attributed the delay to the multiple rounds of conversation with the promoters, bankers, alternate investors and vendors. “It’s all recorded in the files if you ever get to see them,” the telecom bureaucrat quoted above added. 

Bureaucratese aside, each no-action day on funding pushes Vi to the point of no return. The telco lost 2.4 million subscribers in December 2022, according to the telecom regulator, Trai. But an apparent slowdown in user loss may reverse once Vi’s two powerful rivals roll out 5G across India by December (or March 2024).