Everyone wins in India’s telecoms debt reset

There’s plenty of reason to cheer the Indian government into becoming the top shareholder in Vodafone Idea (VODA.NS), the country’s third-largest operator with 253 million subscribers.
A debt-for-equity swap relating to $2.2 billion of interest payments on deferred mobile phone spectrum and other charges over four years is set to hand New Delhi 35.8% of the financially stretched company. Britain’s Vodafone (VOD.L) ends up with 28.5%, and its local partner, Kumar Mangalam Birla’s Aditya Birla Group, with 17.8%. That’s not too bad for the two big backers, who had been reluctant to put in more capital given the ailing telecoms firm’s $26.2 billion of net debt, a crippling 11 times its EBITDA.
The surprise acceptance of the deal, part of a wider rescue package proposed by New Delhi in October, creates winners all around. It significantly increases the chances of Vodafone Idea’s survival, sparing its lenders the threat of bad loans. That, in turn, cuts the chances of a duopoly of private sector operators dominating the giant emerging market.