Govt Saved Telecom Company 2 Months After the Ruling Party Received Donation

Aditya Birla Group’s Debts Amounted to 2,140 Billion Rupees

Newsreel Asia Insight #183
April 6, 2024

The Indian government converted a substantial debt into equity for Vodafone Idea (Vi) shortly after the telecom operator’s parent company, the Aditya Birla group, donated significant funds to the ruling Bharatiya Janata Party (BJP), according to a report of a collaborative project involving three independent media outlets and journalists. The move came as Vi, India’s third-largest telecom operator, faced financial distress, with debts amounting to 2,140 billion rupees, primarily owed to the government.

Vi, jointly owned by Vodafone Plc and the Aditya Birla group, has been struggling financially for over five years, with its market share dropping significantly. In September 2021, the government introduced a relief package for the telecom sector, allowing companies like Vi to convert part of their government debt into equity, says the report, published by Scroll.in, one of the three media outlets, apart from The News Minute and Newslaundry, that looked into electoral bond data released by the Election Commission of India. By January 2022, Vi had opted for this conversion, but by the end of the year, there was no progress on the government’s part, leading to a public announcement of distress by Vi on Dec. 6.

Just six days after this announcement, the Aditya Birla group firms donated one billion rupees to the BJP through electoral bonds. Subsequently, in February 2023, the government converted 160 billion rupees of Vi’s debt into equity, thus becoming its largest shareholder. This conversion occurred amid a backdrop of repeated donations to the BJP by the Aditya Birla group, totalling nearly 5.56 billion rupees between April 2019 and January 2024, with 2.85 billion rupees going directly to the BJP.

The telecom sector in India has seen a significant consolidation, with the number of operators decreasing from 12-13 a decade ago to just four, raising concerns about reduced competition, the report notes, adding that the government’s intervention in Vi’s case was seen as a move to prevent further decrease in competition, according to telecom experts.

In a related development, the Aditya Birla group made another round of donations to the BJP in November 2023, coinciding with the passage of a new Telecommunications Bill that favoured the industry, according to the report.

The telecom industry’s support for the new law, which included provisions for easier spectrum use and access to private property for telecom infrastructure, indicates a continued close relationship between the sector and the government. The donations from other telecom giants like the Bharti group and firms linked to the Reliance group further reflect the significant financial interactions between the telecom sector and political entities.