Could the fortunes of Indian operator Vodafone Idea be about to change? That’s probably too optimistic an assessment at this stage, but recently announced plans to raise Rs45,000 crore (about US$5.5 billion) via equity and debt signal that a much-needed funding boost may finally be on the way for Vodafone Idea.
The company plans a meeting of its shareholders (including, presumably, the government, which owns 33% of Vodafone Idea) on 2 April to approve the equity fund raising.
The money is likely to mainly be used for capacity expansion, to improve the 4G network, and to fund stalled 5G rollout in an effort to cut the gap with rivals Reliance Jio and Bharti Airtel, who are surging ahead in key markets.
India’s Economic Times reports that the Vodafone Idea board has already cleared raising Rs20,000 crore (US$2.4 billion) via equity or equity-linked instruments to be completed in the April-June quarter.
The company is also actively engaged with its lenders for tying up the debt funding, which will follow the equity fund raise. Combined with the equity this will raise the US$5.5 billion mentioned earlier.
A statement said: “These investments will enable the company to improve its competitive positioning and offer an even better customer experience."
The shares of the operator have risen 13% in the last month amid expectations that the fundraising effort would go ahead.
But will would-be investors and lenders get involved? Debt funding could be costly given the company’s financial situation, which includes some truly mind-boggling numbers. Its net debt is estimated at to Rs2.14 lakh crore (US$25.8 billion) along with nearly Rs70,000 crore (US$8.4 billion) of AGR (adjusted gross revenue) dues.
Cash and cash equivalents were at Rs318.9 crore (US$38.5 million). Bank debt, though, currently stands at less than Rs4,500 crore (US$543 million). However, catching up with Airtel and Jio could involve billions of dollars of fresh capital on top of the billions now being discussed.
That said, Vodafone Idea argues that its financials are improving: while it has a falling mobile user base, 4G subscriber numbers are apparently growing – as is ARPU.
The last word, for now, comes from Vodafone Idea, which, according to the Economic Times, announced: “The company has consistently shown an improvement in performance even with limited investments. With the proposed fund raise and the positive operational developments, the company is confident of effectively competing in the market.”
