Vodafone Idea board approves ₹45,000 crore fundraise

New Delhi: Cash-strapped private telecom operator, Vodafone-Idea, on Tuesday saw its board approve a ₹45,000-crore fund raising initiative—including a ₹20,000 crore equity-based fund raise from existing investors. A shareholder meet for the fund raise is expected to take place on 2 April, post which the operator expects to complete the equity fund raise by the end of the upcoming June quarter.

Following the equity fund raise, Vodafone-Idea will further look to raise debt—taking the total amount of funding up to ₹45,000 crore. Existing promoters of Vodafone-Idea will also be involved in the equity fund raise, the company confirmed in a media statement.

The telecom operator remains the only one without consumer-end 5G services, after both Reliance Jio and Bharti Airtel rolled out 5G services across the country through last year. Kumar Mangalam Birla, chairman of Aditya Birla Group—one of the main promoters of Vodafone-Idea, said at the 2023 India Mobile Congress keynote that the telecom operator will look to introduce 5G services this year. The telco reaffirmed the statement on Tuesday’s release, stating that the fund raise will be used “towards significant expansion of 4G coverage, 5G network rollout and capacity expansion.”

Vodafone-Idea’s biggest challenge presents itself in the form of a falling customer base. As per data from Telecom Regulatory Authority of India (Trai)’s monthly subscriber reports, Vodafone-Idea’s subscriber base stood at 223 million at the end of December 2023—down 7.5% from 241.3 million a year ago. Even in the last month of last year, the telecom operator lost 1.37 net subscribers from its user base. In comparison, Reliance Jio and Bharti Airtel added 3.99 million and 1.85 million subscribers in December last year respectively. The two rivals for Vodafone-Idea presently have 459.8 million and 381.7 million subscribers, respectively.

The telco, however, claimed that its fund-raising move “follows a marked improvement in operating metrics.”

“The company has managed to grow its 4G subscriber base and average revenues per user (Arpus) consecutively for the last 10 quarters. It remains focused on providing competitive data and voice experience at all locations where it is present… and is also steadfast in building a differentiated digital experience adding several digital offerings in the recent quarters. It 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,” Vodafone-Idea’s media statement read.

Industry analysts expressed bullishness toward Vodafone-Idea’s fund raise, but said that it can potentially take long for the telecom operator to turn its business around. A senior analyst at a Mumbai-headquartered brokerage firm, who requested anonymity since the firm was yet to publish its official note on the operator, said that increase per-user revenue and a still-sizeable premium subscriber base in tier-I cities bode well for Vodafone-Idea.

“The telco is unlikely to be able to compete with Reliance Jio in terms of the latter’s volume-driven market play in tier-II cities and beyond. Vodafone-Idea also has the lowest valuation among the three top telcos, all of which combine to make the operator an interesting option for investors. With rising Arpus, a cash infusion can help the operator revive its present quantum of losses—but this is likely to at least take two years to navigate. Sizeable infrastructure investments will also play a role here,” the analyst told Mint.

Over the past year, Vodafone-Idea’s Arpu increased to ₹145—up 7.5% from ₹135 a year ago. However, the per-user earnings for the telecom operator was sizeably lower than Bharti Airtel’s ₹208 and Reliance Jio’s ₹182 in Arpu earned as of December last year.

Going forward, it remains to be seen how the equity-linked fund raise takes place. Vodafone-Idea did not respond to Mint’s query on whether the fund raise is likely to involve any divestment of stake from existing investors. The Centre’s Department of Investments and Public Assets Management (Dipam) presently holds 33.1% of the operator, with the British Vodafone Group PLC holding 32.3%. Aditya Birla Group presently holds 18.1% of the operator, with the rest 16.5% of the company being held by public shareholders.