Why Doesn't the Government Want to Take Over Vodafone Idea Operations?

Why should the government, in its hands the government of India (GOI), have control over the operations of Vodafone Idea (VI)?

Why They Should Be Investors

One could argue that their role should be simple and clear: they should act as investors rather than overseers. However, according to recent news and my observations, I am faced with a new, concerning fear.

As of two days ago, the GOI was set to acquire a 36% stake in Vodafone Idea for a debt reimbursement of Rs. 16,000 crore. On the surface, this appears to be a straightforward deal. However, the situation changes dramatically if the privatization bill goes through.

The Potential for Duopoly

One cannot help but wonder: what's to stop the GOI from selling this 36% stake to Mukesh Ambani or his company, Reliance Jio (Jio), tomorrow?
Today they legally cannot, but if the privatization bill is passed, they will be legally eligible to do so. This move could effectively turn Mukesh Ambani into the largest stakeholder in Vodafone Idea, given Vodafone's 28.5% ownership and Birla's 18.5% stake.

Should this happen, it could create a duopoly. With Ambani becoming the largest mobile service provider, he could manipulate market prices, creating a powerful position for himself.

Is the GOI Aimed for a Three-Player Market?

The question is, is the GOI genuinely interested in maintaining a three-player market, or are they merely being used as pawns to strengthen Ambani's position?

The Cozy Deal and Skepticism

The deal itself seemed too cozy to me. Despite Prime Minister Modi and his team of 'crackpot economists,' I was initially optimistic about the possibility of revolutionary economic strategies. However, the news that the GOI will not be appointing directors to Vodafone Idea's board is alarming.

Typically, in major mergers or acquisitions, directors are appointed to oversee the investment. The GOI not appointing directors is a highly suspicious move. It could imply that the GOI's ownership of this 36% stake is temporary, leading to this sense of fear.

I may be driven by paranoia, but it is a realistic possibility in the legal context.

For more insights and the latest updates, stay tuned for further analysis and developments.