New Delhi: Vodafone Idea is all set to become the latest entrant into the Indian 5G network space that is currently witnessing a duopoly of Reliance Jio and Bharti Airtel. As per the company’s annual report for FY 2022-23, Vodafone Idea is in advanced talks with various network vendors for finalisation of its 5G rollout strategy. It says the device testing has been concluded of all major original equipment makers (OEMs) on its upcoming next-gen mobile broadband network.
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However, the company is definitely on the back foot as the company is just recovering from the existential crisis it faced because of mounting debts. In February 2023, the finance ministry completed the debt-to-equity conversion in Vodafone Idea of its Rs 16,133 crore interest dues, and the government now holds a 33.4 per cent stake, as reported by Moneycontrol.
The Centre is now the largest shareholder in Vi and stepped in to save the ailing telecom operator and prevent monopoly in the sector. However, the government will not take over the management control.
Vodafone Idea To Ramp Up 4G Network Coverage
Even as the company is in the final stages of 5G network rollout, Vodafone Idea’s chairman Ravinder Takkar has reiterated the company’s commitment to ramping up 4G coverage in India.
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“The company will continue to make investments for expanding 4G coverage and capacity, especially in its 17 priority circles and introduce 5G services once funding is in place,” Takkar said in Vi’s latest annual report.
Vodafone Idea is a joint venture between Vodafone Plc from the United Kingdom and India’s Aditya Birla Group. In the annual report it said that the company continues to actively engage with lenders and investors for further fundraising.
Not A Cake Walk
As mentioned earlier, Vodafone Idea is on the back foot when it comes to launch of 5G network. Both Bharti Airtel and Reliance Jio have expanded their 5G networks in the country considerably since last October.
Delayed external fundraising process could be attributed as one of the major hindrances that kept Vodafone Idea from launching 5G earlier. The company was deep in debt, and its tower provider had repeatedly warned Vodafone Idea that failing to pay dues will result in losing tower access.
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The loss-making telco’s efforts to raise around Rs 20,000 crore via a mix of debt and equity have been unsuccessful for well over a year now, as per Economic Times. In order to get fresh capital infusion from its promoters, Vodafone Idea is expected to go down the path of third-party equity funding.
While an equity funding would trigger investments in Vi’s 4G network and its pending 5G rollout, it hasn’t happened yet, and the lenders are delaying refinancing of part of its existing bank debt.
In March quarter, Vodafone Idea ended posted Rs 2.09 lakh crore net debt and a modest cash balance of Rs 230 crore. It’s widely expected that the company’s promoters will infuse 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 became its biggest shareholder.
Tariffs To Increase
Ravinder Takkar, the chairman of Vodafone Idea, in its annual report said that the telecom tariffs continued to remain unsustainable and needed to increase significantly from current levels to improve overall industry health and generate reasonable returns for operators to promote investments, including investments towards new and emerging technologies.
At Airtel’s fourth quarter earnings call, the company’s managing director Gopal Vittal too had reiterated that tariffs needed to go up quickly as the current 8.5 per cent RoCE (return on capital employed) remained way too low.
