From Breakingviews - India’s Vodafone stress test may have ugly results
Jio, its profitable rivals. That will effectively condemn the company formed through a defensive merger in 2017 to a slow, painful decline, and the country to a telecom duopoly. State-owned banks would then have to shoulder the losses. With so much stress, though, other creditors might find a reason to pull the rug from under the company’s feet sooner.
There may be a case for testing the enthusiasm of Vodafone’s existing shareholders. But if India pushes too hard for them to yield, it may not be pleased with the result.Vodafone Idea will need a capital infusion, and converting its debt into equity is “a complex issue” which is under discussion, The Economic Times reported on Jan. 5, citing Ashwini Vaishnaw, India’s minister of communications.
It is unviable for the government to proceed with the conversion if the company’s top owners are unwilling to infuse enough capital into the business, the publication reported a day earlier citing a senior official. Vodafone has called on lenders including State Bank of India, Punjab National Bank and HDFC Bank for loans worth more than 700 billion rupees so that it can pay Indus Towers, the Economic Times reported on Jan. 6 citing three people aware of the matter.Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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