- In 20-21, Vodafone Idea lost over ₹ 120 crores per day and had shown annual losses of Rs 46,000 crore.
- The company is expected to raise funds from its promoters — the Vodafone Group and the Aditya Birla Group.
- It is trying out avenues of monetization like Vi games that offer free as well as paid games.
In August 2018, Vodafone India merged with Idea cellular to form a new company named Vodafone Idea Limited after a huge tariff war and reductions in margins hit rock bottom. Reliance Jio had entered the market and ate up portions of the market share of major telecom operators to emerge as a telecom operator with the largest market share in India.
In 20-21, Vodafone Idea lost over ₹ 120 crores per day and had shown annual losses of Rs 46,000 crore. Its share price was stagnating when the Government of India agreed to take a 36% stake in the company.
Vodafone Idea Limited is India’s third-largest telecom service provider and is working on a combination of equity conversion, digital services, tariff hikes and more to stay in the game. It is trying out avenues of monetization like Vi games that offer free as well as paid games. Some of its other offers are “non-stop gaming”, “ad-free music with unlimited downloads”, “High-speed Internet anytime, anywhere”, “free sim delivery at the doorstep” and “port your number” to enjoy “exciting benefits”.
Vodafone Idea Limited has a huge debt pile of ₹ 1.9 trillion as of December 31, 2021. The government has a stake of nearly 36% as it opted to convert its dues of ₹ 16,000 crores to stock. Further, the company is expected to raise funds from its promoters — the Vodafone Group and the Aditya Birla Group.
Hemang Khanna, associate vice president at Kotak Institutional Equities Research said “The announced capital raise will provide some respite but a long and arduous path still remains to be traversed if VIL has to truly make it out of the woods.”
“It is yet to be seen if any external strategic investors decide to participate in VIL’s upcoming ₹100 billion ( ₹10,000 crores) capital raise, given the underlying challenges that the company faces,” he added.
“The ₹4,500 crore equity infusion by promoters is a start of the fundraising process. It strongly signals promoters’ commitment to VIL. The board has already approved total funding of up to ₹14,500 crores which is seen by the company and board as adequate for the company’s growth requirement,” a spokesperson from VIL said.
“Investors are doing their due diligence and these processes take time. It will happen in the coming months. There is no worry because there are no surprises that have cropped up (in the entire process) and the process is not taking longer than expected,” an executive from VIL said.
The major issue that VIL has is that it has to repay its debts as well as invest in the latest technology. Its competitors are preparing to acquire 5G airwaves which is the next generation of high-speed internet and even VIL will require billions to invest into buying the spectrum.
Sachin Salgaonkar, BofA’s managing director, APAC, telcos, in a research note stated that VIL will require meaningful investments to fix issues and that it is still an underinvested network as compared to Airtel or Jio.
According to analysts, VIL’s ARPU (Average Revenue Per User) has to increase to ₹250 over the next three to four years for it to sustain the leverage. Its ARPU rose from ₹109 in the September quarter, to ₹115 in the December quarter.
In partnership with Nazara Technologies, VIL launched Vi Games, a dedicated games store in its mobile app, that offers free and paid games on a subscription model, ranging between ₹26 for three days and ₹56 for a month.
According to a few reports, the government is considering releasing bank guarantees worth ₹15,000 crores to VIL, given against AGR and dues related to spectrum bought in previous auctions.
If the bank guarantees, still lying with the government, are returned, it could then be replaced by funded and non-funded facilities with banks, analysts at Citi Bank stated. These factors could lead to a turnaround this year.
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