Vodafone Idea to raise Rs 14,500 Crore from Developers, External Investors, Telecom News, ET Telecom

New Delhi: The board of Vodafone Idea (Vi) on Thursday approved a plan to raise Rs 14,500 crore from its promoters – UK group Vodafone Group Plc and Indian group Aditya Birla (ABG) – and external investors as the cash-strapped operator attempts to revive operations and compete more effectively with Reliance Jio and Bharti Airtel.

The telecommunications company will raise 4,500 crore rupees ($600 million) through a preferential allotment at 13.30 rupees per share to its promoters and related entities, Vodafone Idea said in an exchange filing on Thursday. The Vodafone Group will invest 3,375 crore rupees, or $450 million, which will be paid from funds raised by the partial sale of its stake in Indus Towers, the British telecommunications major said in a separate statement. ABG is likely to invest the remaining Rs 1,125 crore, but the diversified conglomerate has not commented.

An additional Rs 10,000 crore will be raised either through equity, debt or a mix, Vodafone Idea said. He did not give details or deadlines for closing the fundraising exercise. Its management had previously set a deadline of the end of March to close the fundraiser.

Change of position after the government package

The injection of funds by the promoters marks a sort of reversal as they had long refused to inject new equity into the operator which has never recorded a profit since its creation following the merger of Vodafone India and Idea Cellular in August 2018. But the government’s relief package announced last September – which allowed the company to defer statutory contributions for four years among other support measures – has significantly eased the company’s cash flow. telecommunications company and incited the promoters to change their position.

Analysts say the infusion of funds by the promoters will give potential investors the confidence to participate in the operator’s capital raising efforts, although some have estimated that the fundraising target of Rs 14,500 crore was slightly lower than expected. The loss-making telecom company, with a cash balance of Rs 1,500 crore at the end of December, has been in talks with a host of private equity players such as Apollo Global for equity and debt financing.

Currently, Vodafone Group and ABG own 44.39% and 27.66% of Vodafone India respectively. The ownership structure is likely to undergo significant changes, in particular with the choice of the telecommunications operator to convert the interests, which accumulate due to the deferred payment, into shares of the State. Vodafone Idea had said in January this year that according to its calculations the government could end up owning around 36% of telecom operators. The government has not yet confirmed this.

In its statement, Vodafone Idea said its board of directors had approved the issuance of up to 3,38,34,58,645 shares at Rs 13.30 per share “for an aggregate consideration of up to Rs 4 500 crore to Euro Pacific Securities Ltd. and Prime Metals Ltd. (entities of the Vodafone group and promoters of the company), and Oriana Investments Pte. Ltd (an entity of the Aditya Birla group forming part of the promoter group) on a preferential basis…” .

The carrier’s stock ended up 6.1% at Rs 11.08 on Thursday on BSE.

The telecommunications company will also issue “…stock or securities convertible into stock, global certificates of deposit, U.S. currency convertible bonds, convertible debentures, warrants, an issue consisting of non-convertible debentures and warrants entitling the holder(s) of warrants to apply for shares, or a combination thereof, up to an aggregate amount of Rs 10,000 crore by way of private placement, placement in qualified institutions or by any other authorized mode in one or more tranches,” Vodafone Idea added in the statement.

The company’s board also approved calling an extraordinary general meeting on March 26 to approve the latest fundraising initiatives.

The phone company is desperate to raise funds to invest in expanding its 4G network to stop its rapid subscriber losses, as well as take a significant stake in the upcoming 5G spectrum auction. Analysts have said raising Rs 10,000 crore quickly is crucial for its future.

“Vi’s targeted fundraising of Rs 14,500 crore is a bit below expectations and will not be enough to turn the business around financially. But a new injection of capital by its co-sponsors will strengthen its balance sheet and also give external investors and banks the confidence to participate more enthusiastically in the telecom company’s future fundraising efforts,” the company told ET Naveen Kulkarni, chief investment officer at Axis Securities.

In its statement, Britain’s Vodafone said it raised Rs 1,420 crore by selling 63.6 million shares, or 2.4%, in Indus Towers at Rs 226.84 per share. It further plans to sell 127.1 million shares, or 4.7%, of Indus to Bharti Airtel for Rs 224.57 per share. This would earn the British telecommunications major less than Rs 2,900 crore, which under its pact with Airtel would have to be used to infuse into Vodafone Idea, which would use it to settle its debts to Indus Towers.

“Vodafone has the option to contribute any residual proceeds from the sale of the main shares (in Indus) as capital to Vi before July 15, 2022. Any residual proceeds not contributed to Vi will be available to Indus until to November 19, 2022. , to secure Vi’s obligations under the Master Services Agreements,” Vodafone Group said.

After selling a total 7.1% stake in Indus, Vodafone would retain 567.2 million shares, or 21%, in Indus. Airtel’s stake in the tower company will increase to 46.43%.

The British telecommunications company, which held a 28.1% stake in Indus, said on Wednesday it would sell a 2.4% stake on Thursday in a block deal and was also in talks with the a major shareholder of the towers company to sell an additional 4.7%. People familiar with the matter told ET that Bharti Airtel was that shareholder.

“Vodafone continues to be in talks with several interested parties regarding a possible sale of the residual shareholding,” the telecom operator said.

Additionally, UK’s Vodafone said there was no certainty that an agreement would be reached regarding such a sale. “Indus will continue to have a secondary pledge on the residual shareholding ranking behind the security provided to Vodafone’s existing lenders for the €1.4 billion loan used to fund Vodafone’s contribution to the rights issue. Vi in 2019,” Vodafone Group said.

Last December, Vi management said the company was aiming to quadruple its annual capital expenditure to $2 billion (about Rs 15,000 crore) in its bid to take on stronger financial rivals Reliance. Jio and Bharti Airtel.

Over the past three years, cash-strapped Vi has lost millions of customers and revenue share every quarter to Jio and Airtel. This was mainly due to its inability to invest adequately in expanding its 4G network to match its competitors on mobile broadband coverage.

But things appear to be looking up for the telecoms operator after widespread hikes in prepaid rates last November on the heels of the telecoms reform package, which analysts say will provide the telecoms operator with stream relief. cash flow of Rs 1 lakh-crore over four years.

Shirlene J. Manley