The Indian government has agreed to forego $2.1 billion (€1.8bn) in interest payments and instead become the largest shareholder in British telecoms giant Vodafone’s local unit Vi, the company said on Tuesday.

Vodafone has been losing money in India since Asia’s richest man Mukesh Ambani kicked off a price war in the vast market when his conglomerate Reliance launched telecoms arm Jio in 2016.

Vodafone has been losing money in India since Asia’s richest man Mukesh Ambani kicked off a price war in the vast market when his conglomerate Reliance launched telecoms arm Jio in 2016

With the British parent company refusing to inject more money, Vi – which September data shows is squashed under 1.94 trillion rupees (€23 billion) of debt – found itself unable to pay some interest owed on spectrum fees and other dues.

New Delhi agreed after protracted negotiations to allow Vi and other telecom companies to convert what they owed into equity, in addition to a four-year moratorium on payments. Both Vi and telecom giant Bharti Airtel opted to delay payments by four years. Vi is the only operator converting its interest into government equity. Market leader Jio opted out of both options.

“Following conversion (of 160 billion rupees), it is expected that the government will hold around 35.8 per cent of the total outstanding shares of the company,” Vi, formerly known as Vodafone Idea, said in a statement.This will result in Britain’s Vodafone Group and India’s Aditya Birla Group diluting their stakes to 28.5 and 17.8 per cent respectively, it added. Vi shares slumped 13 per cent in Mumbai because of the dilution.