India’s largest telecom operator Vodafone Idea Ltd is planning to raise money through a private infrastructure investment trust (InvIT) of its fibre assets, two people aware of the development said. A similar plan is being considered by rival Reliance Jio Infocomm Ltd.
On 4 May, Vodafone Idea informed the stock exchanges that it plans to seek shareholder approval to transfer its optical fibre assets to a wholly-owned subsidiary called Vodafone Towers Ltd. The fibre network comprises more than 156,000km of intra-and inter-city fibre routes.
InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.
According to the first of the two persons cited above, both of whom spoke under the condition of anonymity, the telecom operator has already begun early discussions with potential investors, mainly pension funds and long-term investors for the proposed InvIT, to help reduce its debt of over ₹1 trillion.
“A private InvIT structure is one of the ways that the telco is looking to monetize these fibre optic assets. The InvIT structure will allow the company to retain certain limited control over the assets and have various special rights, which would be difficult in an outright sale of the assets," he added.
Plans to monetize the fibre optic assets follow the telco’s other moves to raise funds as it looks to beef up its war chest to compete with Mukesh Ambani-controlled Reliance Jio.
Vodafone Idea raised ₹25,000 crore in a recently concluded rights issue, which saw promoters Aditya Birla Group and Vodafone Group investing ₹17,920 crore. Vodafone Idea also plans to raise up to ₹5,000 crore by monetizing its 11.5% stake in Indus Towers.
On Wednesday, stock exchange filings showed that Vodafone Idea promoters have pledged shares worth 44.39% of the shareholding with a consortium of banks.
According to industry experts, a private InvIT structure offers certain benefits over an outright sale of assets.
“Given that the company will be associated with these assets in some or other manner, it ensures your skin in the game and continuity, as you are involved with the trust as a sponsor or co-sponsor. It also allows you to keep adding assets at a later date, which is something that a company will not be able to do once you have sold the assets outright. The InvIT structure allows you to release capital from such assets and lets you focus on your core strengths," said Gopal Agrawal, co-head, investment banking, Edelweiss.
With its plans to monetize the fibre optic network through an InvIT, Vodafone Idea joins arch rival Jio, which too has been in the process of monetizing its fibre optic and tower assets through a similar structure.
In January, Mint had reported that Reliance Jio Infocomm Ltd was planning to pare debt by monetizing its fibre and tower assets through the InvIT route, with an eye on making Jio an asset-light digital services company. Jio is spinning off its fibre and tower businesses into Jio Digital Fibre Pvt. Ltd and Reliance Jio Infratel Pvt. Ltd, respectively.
On 30 April, The Economic Times reported that several global investors such as CPPIB, Ontario Municipal Employees’ Retirement System (OMERS), British Columbia Pension Corporation (BCPC) and Middle East sovereign wealth funds, such as Abu Dhabi, are in initial discussions with Reliance to invest in the two infrastructure investment trusts set up to own Jio’s tower and fibre assets.