Vodafone Idea plans $3.5 bn investment to take on Jio

Vodafone Idea is planning to raise Rs 25,000 crore or $3.5 billion via a rights offering to their promoters.
Idea and Vodafone dealsVodafone Idea’s board of directors on Wednesday approved the Rs 25,000 crore fund-raising plan.

Vodafone Group and Aditya Birla Group will contribute up to Rs 11,000 crore and up to Rs 7,250 crore, respectively as part of such rights issue.

Vodafone Group holds 45.1 percent equity stake in Vodafone Idea, while Aditya Birla Group controls 26 percent and Idea shareholders own 28.9 percent. Last year, Idea and Vodafone completed the $23.2 billion merger.

Vodafone Idea CEO Balesh Sharma earlier revealed  that the Indian mobile operator aims to expand its 4G footprint to cover 80 percent or a little over 1 billion of India’s population by 2020. At present, the company’s 4G coverage reaches about 50 percent of total 1.3 billion population.

Vodafone Idea has a broadband network of 3.4 lakh sites and distribution network with 1.7 million retail outlets.

Vodafone Idea in November said it plans to invest Rs 27,000 crore in 2019-20 towards Capex, supported by savings of around Rs 14,000 crore that it expects to come from synergising operations of merged entities.

The merger between the second and third largest telecom operators was aimed at generating Rs 14,000 crore annual synergy, including Opex synergies of Rs 8,400 crore. The net debt of Vodafone Idea stood at Rs 1,09,200 crore on June 30, 2018.

The plan underscores how Indian carriers have yet to figure out how to compete against billionaire Mukesh Ambani’s Reliance Jio Infocomm, which offers packages with enough data to watch 46 hours of YouTube videos for about $2 a month, Bloomberg reported on Thursday.

Rohan Dhamija, head of South Asia and Middle East at consulting firm Analysys Mason, said: “Vodafone Idea will use the funds to make network investments in 4G and for warding off competition from Reliance Jio.”

Vodafone Idea earlier indicated that its main focus in 2019 will be the expansion of its 4G network across the country. Vodafone Idea is concerned about slow growth in ARPU due to lack of mobile data coverage across India.

Separately, Vodafone Idea is also planning to sell its 11.5 percent equity stake in telecom tower company Indus Towers.

Reliance Jio has 280 million subscribers and turned profitable — even bringing connectivity to remote Indian villages.