In what may come as a major relief for the telecom sector, especially for the severely-stressed Vodafone Idea, the Union Cabinet is likely to consider and discuss a relief package for the sector on Wednesday, sources said. The government has been in talks with several stakeholders, including banks, for a package for the sector as Vodafone Idea is in a beleaguered state with heavy losses and high debt and concerns have been raised over a possible duopoly in India telecom sector if it shuts. Further, it is also the most impacted telco due to the AGR claims of the government.
People in the know said that the government is of the view that competition must prevail in the sector and any chances of a duopoly should be averted. Last week, Vodafone Idea's former Chairman, Kumar Mangalam Birla met Union Communications Minister Ashwini Vaishnaw. According to people in the know, during the meeting on September 1, Birla and Vaishnaw discussed about the health of the sector and the urgent need for government intervention.
On August 4, the board of Vodafone Idea accepted the request of Birla to step down as the Non-Executive Director and Non-Executive Chairman of the Board. Days before Birla's resignation as the Chairman, it became public that he had written to the government that he is willing to hand over his stake in the debt-ridden company to government entities in a bid to keep the company operational.
In a letter to Cabinet Secretary Rajiv Gauba on June 7, Birla said that, with a "sense of duty" towards 27 crore Indians connected with Vodafone Idea, he is willing to hand over his stake to public Sector Unit (PSU), a government entity or any domestic financial entity, or any other entity that the government may consider worthy of keeping the company as a going concern.
In the letter, Birla sought clarity on adjusted gross revenue (AGR), adequate moratorium on spectrum dues and floor pricing, adding that without immediate and active government support, VIL's operations will be at an "irretrievable point of collapse".
On Tuesday, backed by the prospect of relief measures coming from the government, telecom stocks surged on Tuesday. Shares of Vodafone Idea on the BSE surged nearly 15%. At the end of the day's trade, its shares closed at Rs 8.28 per share, higher by 14.68% from its previous close. Bharti Airtel shares on the other hand, rose 2.48% to end at Rs 670.70 per share.