Vodafone Idea to offer Rs 2,458 crore stake to Nokia and Ericsson

Vodafone Idea to offer Rs 2,458 crore stake to Nokia and Ericsson

Vodafone Idea (Vi) has decided to offer a Rs 2,458 crore stake in the financially beleaguered telecommunications (telecom) operator to long-term vendors Nokia and Ericsson in a bid to partially clear outstanding dues.

The company’s board has approved the preferential issue of 1,027 million equity shares with a face value of Rs 10 each to Nokia and 633.7 million shares to Ericsson, Vi said in a regulatory filing on Thursday.

At an issuing price of Rs 14.8 per share, Nokia will potentially receive an equity stake worth Rs 1,520 crore, while Ericsson will receive equity worth Rs 938 crore.

“After this preferential issuance, the shareholding of Nokia and Ericsson in the company will be 1.5 per cent and 0.9 per cent, respectively,” Vi said.

The combined stake owned by promoters Aditya Birla Group and Vodafone Plc will stand at 37.3 per cent, while the Centre will hold 23.2 per cent, with the remaining 37.1 per cent being public shareholding.

Vi’s shareholders must approve the proposal, and an extraordinary general meeting of the company has been scheduled for July 10 to consider the stake transfer, the telecom company (telco) said.

“Vodafone Idea is all set to participate in industry growth with the right investments to expand its 4G coverage and offer a 5G experience to its customers while remaining focused on its execution capabilities. As Vi embarks on its growth journey, support from key stakeholders is critical. The agreement with Nokia and Ericsson reaffirms these vendors as long-term partners of the company and sets the stage for the next phase of our growth,” said Vi Chief Executive Officer Akshaya Moondra.

Faster 4G rollout

Apart from easing vendors’ concerns over pending payments, the move may also secure support from the two global telecom equipment giants to help Vi expand its 4G coverage more rapidly, the telco indicated. The expansion of 4G coverage, including establishing more towers in the sub-gigahertz segment, capacity growth, and the 5G rollout, are the telco’s primary goals.

Vi positioned the preferential issue as a move to bolster the company’s capital expenditure (capex) rollout.

“With this equity issuance, Vi has raised Rs 24,000 crore of equity, including the conversion of 1,440 optionally convertible debentures (OCDs) in March 2024 by ATC India (of 1,600 OCDs issued), a follow-on public offer issue in April 2024, and a preferential issue to promoters in May.

Additionally, in line with its stated fundraising road map, the company is in active discussions with its lenders to raise debt funding to the tune of Rs 25,000 crore,” the company said.

Vi executives recently said that the debt funding will be primarily used towards capex, which is expected to be Rs 50,000–55,000 crore over the next three years. However, the company’s largest chunk of dues is owed to the mobile tower management firm Indus Towers.

While official figures haven’t been disclosed by Indus or Vi, Citi Research estimated Vi’s total current dues to Indus at Rs 5,700 crore, while Ambit Capital pegged it at around Rs 10,000 crore in April.

The telco reported a net loss of Rs 7,674.6 crore in the fourth quarter (January–March/Q4) of 2023–24 (FY24), a 19.5 per cent increase from Rs 6,418.9 crore in Q4 of 2022–23 (FY23), due to higher expenses and stalling revenue.

Its finance cost increased to Rs 6,280.3 crore in Q4, rising 25.5 per cent from Rs 5,006.4 crore in the same quarter of the previous year. For FY24, the net loss expanded to Rs 31,238 crore, up 6.6 per cent from Rs 29,301 crore in FY23.

As of the end of March, Vi had a total subscriber base of 212.6 million and had prioritised 4G coverage expansion over 5G, unlike rivals Reliance Jio and Bharti Airtel, who have launched 5G.