A number of queries have been received on the issue of a few Telecom Service Providers exercising their options in respect of conversion of certain dues to Government into equity as per the Telecom Reforms Package announced on 15th September 2021.
- Is government paying to acquire the shares of any Telecom Service Provider?
No. Government is not paying anything to acquire the shares of any TSP. Certain dues payable by some of the TSPs are being converted to equity/preference capital in these Companies based on options exercised by them as per the Telecom Reforms Package announced on September 15th 2021.
- Then how shares are being acquired in three companies?
The telecom sector has gone through a long period of litigation. As a result, all the telecom companies have high amounts of liabilities which have arisen due to various legacy issues. These legacy issues have put the Indian telecom industry under stress.
The telecom sector is vital for our society, specially so in the post-Covid scenario. Therefore, government approved many structural and procedural reforms in September 2021.
As a part of these reforms, the TSPs were given the option to convert some certain interest liabilities owed to the government into equity/preference shares in favor of the government.
While some companies have opted not to convert their liabilities into equity/preference shares, three companies have exercised the option of converting liabilities into equity/preference shares. They have offered this option to government in lieu of their liabilities.
Government can sell these shares at appropriate time and thereby receive the amounts due.
- Will this make these three companies PSU?
No. These three companies will not become PSUs. These three companies will continue to be managed as professionally run private companies.
- What will be the impact on telecom industry & common man?
Telecom industry needs to stay healthy and competitive. Government’s reforms and support in times of such pandemic means that companies will be able to sustain their business.
It will also stop a scenario where there are very few players in the market. Such potential lack of competition could lead to higher prices & poor services. Enough competition in the market safeguards the interests of the common man.
With conversion of liabilities into equity/preference shares, the sector has got back the ability to invest and provide better services. Companies also retain the ability to invest so that telecom services can reach far-flung areas.