BackDebt-ridden Vodafone Idea eyes external equity funding by year-end
Vodafone Idea is reportedly seeking external equity funding by the end of the year to address its debt issues.
PremiumDebt-ridden Vodafone Idea may reportedly close its external equity funding by the end of this year. Akshaya Moondra, the chief executive of the cash-strapped telecom during the earning call said the talks for equity funding have picked up momentum and he anticipated that they may see a positive outcome in the coming quarters.
The funding is crucial for the telco as it has not posted any profit since the 2018 merger (Vodafone India and Idea Cellular). The company has constantly been losing its subscribers to Reliance Jio and Bharti Airtel.
Through this funding, Vi will be able to raise debt from a consortium of banks.
Meanwhile, on Monday, the telco received funding assurance of up to ₹2,000 crore from a promoter group entity, Vodafone Idea informed about this development in a regulatory filing.
"The company has received a communication from a promoter group entity confirming that in the event of any fund requirement for meeting its impending payment obligations by the company, it shall provide direct or indirect financial support to the extent of ₹2,000 crore," Vodafone Idea said in the filing.
Moondra said that one of the promoters has given assurance of ₹2,000 crore for payments. Still, there is a need to get external funding.
Vodafone Idea's consolidated net loss widened to ₹7,840 crore in the April-June quarter of FY2023-24.
The consolidated revenue from operations during the reported quarter increased marginally by 2.3% to ₹10,655.5 crore from ₹10,406.8 crore in June 2022 quarter.
The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2023, stood at ₹2,11,760 crore.
Debt from banks and financial institutions stood at ₹9,500 crore, and money raised through debt instruments stood at 1,660 crore.
The total subscriber base of VIL declined to 22.14 crore at the end of June 2023 from 24 crore a year ago.
Moondra said that to arrest the complete decline in customer base, the company needs to expand 4G coverage and invest in 5G technology.
The company has had an accumulation of vendor payments, which it expects to start unwinding from the next quarter, he added.
"Once we are through with this quarter and we are able to manage our payments through the support of promoters and non-operational cash inflows that we are looking at, we will then be able to manage and kind of start unwinding vendor dues from next quarter," Moondra said.
He pointed out that the current level of mobile service rates needs to go up for customers using higher levels of data.
"Today, we are equalising the price for somebody who is using 5-6 GB to 28 GB per month now that is where we believe it is not the correct structure," Moondra said.
VIL's average revenue per user (ARPU)-- a key growth matrix of telecom operators, increased to ₹139 during the June quarter from ₹128 a year ago.
Moondra said the ARPU range has compressed from zero to ₹2,000 to ₹150 with GST, and everyone is able to meet their requirement with plans costing ₹500-600.
"Now, the requirement is pay as you use more should apply. At the upper end for higher usage, the ARPU needs to go up. This will happen for sure as we start rationalising the tariff," Moondra said.
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