Cash strapped telco Vodafone Idea expects to close its much delayed external equity linked funding in the coming December quarter with the talks having picked up momentum in the last one month, chief executive Akshaya Moondra said Wednesday. The funding is critical for the telco which hasn’t posted a profit since the merger of Vodafone India and Idea Cellular in August 2018, and has been rapidly losing subscribers to rivals Reliance Jio and Bharti Airtel.
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After the equity and equity linked fund raise, India’s only loss-making private telco will be able to raise debt from a consortium of banks as well, he added, since the banks had asked for equity linked funding to be tied up before they commit to lending money.
In the meantime, the telco will miss meeting the minimum rollout obligations for the first year of 5G spectrum acquisition in 15 out of the 17 circles it has bought spectrum in, and will have to pay Rs 12-13 crore in liquidated damages as a consequence, Moondra said, speaking at the telco’s fiscal first quarter earnings call.
“In the last two months our discussions with multiple groups of investors on both equity and equity linked instruments have gained a lot of momentum, particularly in the last one month. We are making good progress and expect to conclude these discussions in the coming quarter,” Moondra said.
He added that in some cases, the discussions have progressed to the stage of due diligence or discussing proposals with the investors.
“We expect to conclude all these funding arrangements in the coming quarter, and then we will be able to continue our investments (in the network),” Moondra said.
The telco has been engaged with a consortium of banks regarding debt funding. “Generally, their ask is that the equity also needs to be tied up,” Moondra said.
He though didn’t specify the quantum of funds. Previously, the carrier had said it plans to raise Rs20,000 crore via a mix of debt and equity. Analysts though say the operator needs over $7-8 billion to invest in its 4G network, roll out 5G and be competitive in the market against stronger rivals Reliance Jio and Bharti Airtel.
Cash and cash equivalents for the operator rose to Rs 250 crore at June end as compared with Rs 230 crore at the end of March.
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Vodafone Idea had Monday said in an exchange filing that one the promoters – the Vodafone Group UK or Aditya Birla Group – has committed to providing financial support to the extent of Rs 2000 crore. That, coupled with external funding via equity would also lead to funding from banks, all which Moondra said would be tied up in the coming quarter, starting October 1.
While he did not clarify which of the promoters committed the Rs 2000-crore financial support, he did mention that the funding will be made available as and when required. This, he said, could be as early as September. Citi Research, in a report, said the financial support is likely from the AB Group.
Analysts said most of these funds will go towards paying Rs1680 crore to the government as the second of the annual installments towards its 5G spectrum buy, which falls due on August 17. The telco has said it will.pay up within the 30-day grace period from the deadline.
Moondra also said that the telco will be able to pay its accumulated vendor dues from the next quarter – October-December – as its serviceable debt reduces.
“From next quarter our cash generation will be more than our debt obligation which was not the case for the previous few quarters. We will then be in a much better position to reduce our vendor payables which have accumulated over a period of time,” he said.
He said that the company’s payable debt for the next quarter is around Rs 500 crore. The total payable debt from Q2FY24 to Q1FY25 amounts to Rs 7000 crore, he added.
Vi’s trade payables rose almost 3.55% sequentially to Rs 14, 017.4 crore in the June quarter, FY24. These payables – part of Vi’s current liabilities – include dues to tower companies and network vendors/other suppliers
The telco will however continue to lag in terms of 5G rollout and will miss the minimum rollout obligations in 15 out of the 17 circles it acquired spectrum in during the July 2022 5G spectrum auction.
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“Of the 17 circles we have acquired spectrum, for 2 circles we have already filed for compliance. In the remaining circles, as per the NIA (notice inviting applications) there are liquidated damages that are applicable which over a period of 26 weeks is of the order of Rs 12-13 crore,” Moondra explained.
In the meantime, the company has taken staggered entry level tariff interventions in a total of 12 circles where it operates. It started with reducing the validity of the Rs 99 pack from 28 days to 15 days in Mumbai in May this year and has extended the same to 10 other circles so far.
“In Haryana, we did (things) differently. We removed the Rs 99 price point and introduced an interim price of Rs 127 with the same benefits and validity of 28 days,” Moondra informed.
He also said that the impact of the initial tariff intervention taken by Vodafone Idea is not significant yet since it was in very few circles in the June quarter. The bulk of the circles where these interventions were taken was in the current quarter.
He however maintained that for tariff intervention in the higher level of consumption packs, Vodafone Idea will wait for market leaders to take the lead and “will be happy to follow that”.
Moondra also conceded that the telco has seen some impact, in terms of customer churn, from the lack of commercial 5G rollout. “There has been some impact of course, but I would not say it is significant,” he said.
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Vi shares closed down 2.7% at Rs 7.82 on the BSE Wednesday, just days after the telco’s net loss for the first quarter, FY24, widened sequentially to Rs 7,840 crore as it continued to lose subscribers and on higher interest cost.
Vi’s quarterly revenue, though, increased 1.2% sequentially to Rs 10, 655.5 crore, helped by 2.9% sequential growth in average revenue per user (ARPU) to Rs139 on a better subscriber mix and more 4G users.
