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

The "net present value" of the interest is expected to be about Rs 16,000 crore ($2.16 billion), according to the company's estimates.

The conversion will result in dilution to all the existing shareholders of the company, including the promoters.

Following the conversion into equity, the government is expected to hold about 35.8% of the total outstanding shares of Vodafone Idea. Promoter shareholders Vodafone Group would hold around 28.5% and Aditya Birla Group around 17.8%.

India's telecom sector was disrupted by the entry of billionaire Mukesh Ambani's Reliance Jio and forced some rivals out of the market. The sector's troubles have also been compounded by the huge dues owed to the government.

Vodafone Idea, a combination of the India unit of Britain's Vodafone Group and Idea Cellular, has paid the government Rs 7,854 crore in government dues, but still owes roughly Rs 50,000 crore.

On September 15, 2021, the Union Cabinet had approved a set of reforms to address short-term as well as long-term liquidity needs of telecom companies.

Then, the Department of Telecommunications (DoT) had said that the conversion of accrued interest into equity can be done by invoking Section 62 (4) of the Companies Act, and the amount will be treated as a loan until the conversion is completed, Livemint reported.

Larger rival Bharti Airtel on Friday confirmed its decision to not convert the interest on deferred spectrum related payments and government dues into equity.

(With inputs from Reuters)

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