Vodafone Idea Plans $5.43 bn Equity and Debt Raise to Boost 5G Rollout

India’s Vodafone Idea announced on Tuesday its intention to raise approximately 450 billion rupees ($5.43 billion) through a combination of equity and debt, aimed at bolstering its 5G network rollout and expanding its 4G coverage.
VI retail store in ChennaiThe company disclosed that it plans to raise 200 billion rupees through equity funding, which has received approval from its board. This equity infusion will witness participation from promoters or major shareholders with significant influence over the company’s policies.

Vodafone Idea, the third-largest telecom carrier in India by the number of subscribers, said it is actively engaged with its lenders to finalize the debt funding aspect of the capital raise.

Notably, the telecom operator had previously raised 250 billion rupees in 2019 through a rights issue and secured a commitment of 20 billion rupees in financial support from an unnamed promoter group entity in August of last year, Reuters news report said. Vodafone Idea has significantly lowered its Capex in the recent quarters in the wake of financial crisis.

Commenting on the equity portion pledged by promoters, which accounts for only 10 percent of the total funds sought, Vivekanand Subbaraman, an analyst at Ambit Capital, expressed skepticism about the company’s ability to secure the remaining funds.

Nevertheless, analysts view this capital infusion plan, ranging between 400-500 billion rupees, as a crucial move that could enable Vodafone Idea to narrow the gap with its larger competitors in terms of network capacity.

Vodafone Idea’s CEO, Akshay Moondra, indicated during a post-earnings call last month that the company aims to roll out its 5G services within six to seven months following the successful completion of the fundraising. This comes as rivals Bharti Airtel and Reliance Jio have already launched 5G services in various parts of the country.

In terms of financial performance, Vodafone Idea faces challenges, with its average revenue per user (ARPU), a key metric for telecom firms, standing at 145 rupees in the December quarter, compared to 208 rupees for Bharti Airtel and 181.7 rupees for Reliance Jio.

As of the end of 2023, Vodafone Idea’s total debt amounted to 2.15 trillion rupees, inclusive of deferred spectrum payment obligations owed to the government. Meanwhile, its cash reserves stood at 3.19 billion rupees during the same period.