Govt stake in Vodafone Idea: Expert says move will not impact other telecom stocks, may prompt govt to focus more on reforms in this sector

Vodafone Idea approved conversion of spectrum interest and government dues into equity, prompting the telecom shares to tank 22 per cent to Rs 11.50 per share on the BSE. The move facilitates that the government takes majority of 35.8% of the total outstanding shares of the company.  

On Tuesday,  Vodafone Idea shares closed with the fall of 20.88% or Rs 3.10 to Rs 11.75 per share on the BSE.

Though the shares of Vodafone Idea have reacted sharply to the development, expert is of the view that the government taking majority stake in Vodafone Idea will have no bearing on other telecom stocks.  

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There will be no such direct impact on Bharti Airtel and Reliance Jio of government's major stake in Vodafone Idea, said Santosh Meena, Head of Research, Swastika Investmart Ltd. 

The market expert said that on the contrary both are in a strong position to outperform from here. "There is also one silver lining in this event is that government may be more focused on reforms related to this sector as they have become major shareholders in Vodafone idea, "he added.  

Earlier, Vodafone Idea on Tuesday said that its board had approved conversion of the full amount of interest related to spectrum auction instalments and dues owed to the government for use of the airwaves into equity. 

Following the conversion, the government will hold about 35.8% of the total outstanding shares of the company. As per the company's statement, Promoter shareholders Vodafone Group would hold around 28.5% and Aditya Birla Group around 17.8%. 

Meanwhile, Airtel shares traded mute on the BSE around 2.50pm as stocks of this telecom operator were trading flat at Rs 703.75, a gain of 0.13%. Similarly, around the same time Reliance Industries Limited shares were trading with 0.51% gain of Rs 12.45 higher to Rs 2450.10 per share on the BSE.