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Vodafone Idea shares jump 33% after reports that Google may take 5% stake

Shares in Vodafone Idea jumped as much as 33% on Friday after the Financial Times reported that Google may take a stake of about 5% in the telecom operator. FT said the process is at a "very early stage".

The share price of Vodafone Idea rose almost 35 percent on Friday on reports that Google is said to be exploring taking a minority stake in the British telecom group’s struggling India business. Alphabet Inc’s Google is looking to buy about a 5 percent stake in Vodafone Idea, news agency reported on Thursday.

The Stock rose 34.87 percent to hit the intraday high of Rs 7.85 per share on the BSE.

The investment in Vodafone Idea will pit the search giant against Facebook which has picked up a stake in Jio Platforms.

The move assumes significance as Vodafone Idea, in which Vodafone holds over 45 percent stake, is staring at nearly Rs 58,000 crore in statutory dues.

However, as per Credit Suisse, Google‘s 5 percent investment, even if it materializes, won’t be adequate to solve debt problems. The company needs sizeable infusion by promoters or acquisition of controlling stake by an outsider, it added.

“Survival beyond FY23 appears to be low unless the controlling stake is acquired,” stated Credit Suisse. It said it will look for the company’s ARPU trajectory in Q4 given the performance gap between Airtel and Jio.

“Amidst reports of Google picking up 5 percent stake in Vodafone Idea, it appears that the Indian telecom and online space is set to witness a spur of activity, which is always welcome. It would offer consumers a better deal and competition in this space is definitely required as the digital space has gained massive importance post-COVID-19 and is set to witness multifold growth in coming years,” said Aamar Deo Singh, Head Advisory, Angel Broking Ltd.

The dues arose after the Supreme Court, in October last year, upheld the government’s position on including revenue from non-core businesses in calculating the annual AGR (Adjusted Gross Revenue) of telecom companies, a share of which is paid as licence and spectrum fee to the exchequer.

Vodafone Idea has been under severe financial pressure and analysts time and again have cautioned that the telco’s longer-term viability remains under a cloud.

In December, Vodafone Idea Chairman Kumar Mangalam Birla had said VIL may have to shut if there is no relief on the statutory dues.

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