Delhi, New: Vodafone Idea, a cash-strapped private telecom operator, saw its board endorse a 45,000-crore fund-raising drive on Tuesday. Part of the initiative includes an equity-based fund raise of 20,000 crore from existing investors. The operator anticipates concluding the equity fund raise by the end of the forthcoming June quarter, following a shareholder meeting scheduled for April 2.
Vodafone-Idea would seek to raise debt in addition to equity funds, bringing the total amount of funding to 45,000 crore. In a press release, Vodafone-Idea stated that current promoters will also be taking part in the equity fund drive.
After Reliance Jio and Bharti Airtel both launched 5G services nationwide through the end of last year, the telecom provider is still the only one without consumer-end 5G services. The telecom provider plans to launch 5G services this year, according to Kumar Mangalam Birla, chairman of Aditya Birla Group, one of the primary boosters of Vodafone-Idea, who made this announcement at the 2023 Mobile World Congress keynote. The money raise would go “towards significant expansion of 4G coverage, 5G network rollout and capacity expansion,” the telecom company reiterated in a release on Tuesday.
The primary obstacle faced by Vodafone-Idea is a declining user base. According to information from the Telecom Regulatory Authority of India (Trai)’s monthly subscriber reports, Vodafone-Idea had 223 million users as of the end of December 2023, a 7.5% decrease from 241.3 million users the previous year. The telecom provider lost 1.37 net customers from its user base even in the final month of the previous year. By contrast, in December of last year, Reliance Jio added 3.99 million users, while Bharti Airtel added 1.85 million. The current subscriber counts of Vodafone-Idea’s two competitors are 459.8 million and 381.7 million, respectively.
On the other hand, the telecom asserted that the decision to raise money “follows a marked improvement in operating metrics.”
For the past ten quarters, the company has been able to increase both its average revenues per user (Arpus) and its base of 4G subscribers. It is still committed to offering a competitive voice and data experience anywhere it is present. and has been unwavering in its efforts to create a unique digital experience, launching a number of new digital products in recent quarters. Even with little investments, its performance has continuously improved. According to Vodafone-Idea’s media release, “the company is confident of effectively competing in the market with the proposed fund raise and the positive operational developments.”
Although they were optimistic about Vodafone-Idea’s fundraising effort, industry observers cautioned that it might take some time for the cellular operator to improve its operations. Increased per-user income and a sizable premium subscriber base in tier-I cities are positive signs for Vodafone Idea, according to a senior analyst at a brokerage firm with its headquarters in Mumbai. The analyst asked to remain anonymous since the firm had not yet released its formal note on the operator.
In tier-II cities and beyond, Reliance Jio’s volume-driven market push is likely to be too strong for the telecom to match. Among the three leading telecom companies, Vodafone-Idea has the lowest valuation, which together make the operator a compelling choice for investors. A financial infusion can enable the operator recover its current level of losses due to growing Arpus, although navigating this would probably take at least two years. Significant infrastructural investments will also be involved in this, the analyst said Mint.
In the last year, Vodafone-Idea’s Arpu rose to ₹145, a 7.5% increase from ₹135 in the previous year. Nonetheless, as of December of last year, the telecom operator’s earnings per user were much less than those of Bharti Airtel (₹208) and Reliance Jio (₹182) in terms of Arpu.
It will be interesting to watch how the equity-linked fund raise is handled moving ahead. When asked by Vodafone-Idea if the fund raise would likely result in any existing investors selling their interest, Vodafone-Idea did not reply. Currently, British Vodafone Group PLC owns 32.3% of the operator, while the Department of Investments and Public Assets Management (Dipam) of the Centre owns 33.1% of the company. Currently, public shareholders own 16.5% of the corporation, with the Aditya Birla Group owning 18.1% of the operator.
