Vodafone’s idea of rolling out its 5G network soon along with expanding 4G coverage
The Center is now Vi’s largest shareholder and stepped in to bail out the ailing telecom operator and prevent monopolies in the sector. However, the government does not take over management control.
New Delhi: Vodafone Idea is all set to become the latest entrant in the Indian 5G network space currently witnessing a duopoly of Reliance Jio and Bharti Airtel. According to the company’s annual report for FY 2022-23, Vodafone Idea is in advanced talks with several network vendors for the finalization of its 5G rollout strategy. It says device testing has been completed of all major original equipment manufacturers (OEMs) on the upcoming next-generation mobile broadband network.
However, the company is definitely in the background as the company is just recovering from the existential crisis it faced due to mounting debt. In February 2023, the Ministry of Finance completed the debt-to-equity conversion in Vodafone Idea of its Rs 16,133 crore interest, and the government now holds a 33.4 percent stake, as reported by Moneycontrol.
The Center is now Vi’s largest shareholder and stepped in to bail out the ailing telecom operator and prevent monopolies in the sector. However, the government does not take over management control.
Vodafone idea to boost 4G network coverage
Even as the company is in the final stages of its 5G network rollout, Vodafone Idea Chairman Ravinder Takkar has reiterated the company’s commitment to ramp up 4G coverage in India.
“The company will continue to invest to expand 4G coverage and capacity, especially in its 17 priority circles, and will roll out 5G services once funding is secured,” Takkar said in Vi’s latest annual report.
Vodafone Idea is a joint venture between Vodafone Plc of the United Kingdom and Aditya Birla Group of India. The annual report stated that the company continues to actively work with lenders and investors for further fundraising.
No cake walk
As mentioned earlier, Vodafone Idea is lagging behind when it comes to launching the 5G network. Both Bharti Airtel and Reliance Jio have significantly expanded their 5G networks in the country since last October.
The delayed external fundraising process can be attributed to one of the biggest barriers preventing Vodafone Idea from launching 5G earlier. The company was deeply in debt and the tower provider had repeatedly warned Vodafone Idea that failure to pay dues would result in losing access to the tower.
The loss-making telco’s attempts to raise around Rs 20,000 crore through a mix of debt and equity have been unsuccessful for more than a year now, according to the Economic Times. To get new capital injections from its promoters, Vodafone Idea is expected to take the path of third-party financing.
While an equity financing would lead to investment in Vi’s 4G network and upcoming 5G rollout, this has not happened yet and the lenders are delaying refinancing some of the existing bank debt.
In the March quarter, Vodafone Idea ended with a net debt of Rs 2.09 lakh crore and a modest cash balance of Rs 230 crore. The promoters of the company are widely expected to bring in around Rs 5,000 crore of fresh capital in tranches after the government converted the telco’s accrued interest towards AGR arrears into equity in February this year and the largest became a shareholder.
Raise rates
Vodafone Idea chairman Ravinder Takkar said in his annual report that telecom rates remained unsustainable and needed to rise significantly from current levels to improve the overall health of the industry and generate reasonable returns for operators to promote investment, including investments in new and emerging technologies.
At Airtel’s fourth-quarter earnings call, the company’s general manager, Gopal Vittal, had also reiterated that rates had to rise quickly as the current 8.5 percent RoCE (return on capital employed) remained far too low.