Shares of this leading telecom stock surged incredibly by around 12 percent after securing a $3.6 billion (approx. Rs.30,000 crore) deal with global telecom equipment suppliers Nokia, Ericsson, and Samsung.
Share Price Movement
Shares of Vodafone Idea Limited rose nearly 11.7 percent to an intraday high of Rs.11.71 per share from its previous close of Rs.10.48 apiece. The price has since retreated and is now trading at Rs.11.39 per share.
Reason for the Rise
Vodafone Idea Ltd (VIL) announced on 22nd September that it has finalized a major deal worth approximately $3.6 billion (about Rs.30,000 crore) with Nokia, Ericsson, and Samsung for the supply of network equipment over the next three years.
This agreement marks the initial step in the company’s transformative three-year capital expenditure plan, totaling around $6.6 billion (Rs.550 billion). The capex plan aims to expand 4G population coverage from 1.03 billion to 1.2 billion, introduce 5G in key markets, and enhance capacity in response to growing data demand.
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While continuing its long-term partnerships with Nokia and Ericsson, VIL has also brought Samsung on board as a new partner.
Contract Details
These contracts will allow Vodafone Idea to swiftly adopt the latest advanced equipment, significantly enhancing the customer experience. The anticipated new technology is expected to boost energy efficiency and lower operating expenses.
Deliveries under these long-term agreements are set to commence in the next quarter, focusing primarily on expanding 4G coverage to reach 1.2 billion Indians. The knowledge acquired by the vendors in the Indian market over the last two years will enable a more adaptable rollout strategy, tailoring services for both 4G and 5G technologies.
Recent Developments
Following the recent equity raise of Rs.240 billion and the acquisition of additional spectrum worth Rs.35 billion in the June 2024 auction, the company has initiated some immediate capital expenditures while finalizing long-term agreements.
These efforts mainly focused on deploying more spectrum at existing sites and establishing new ones, are projected to enhance capacity by roughly 15 percent and extend population coverage by an additional 16 million by the end of September 2024.
Improvements in customer experience are already being noticed in specific regions where these deployments have been completed.
Management Commentary
Highlighting the advancement, Akshaya Moondra, CEO, of Vodafone Idea Limited, said “ We are on our journey of VIL 2.0, and from hereon, VIL will stage a smart turnaround to effectively participate in the industry growth opportunities.
Nokia and Ericsson have been our partners since our inception and this marks another milestone in that continuing partnership. We are pleased to start our new partnership with Samsung. We look forward to working closely with all our partners as we move into the 5G era.”
Shareholding Pattern
According to the June 2024 shareholding pattern, promoters of Vodafone Idea Limited hold a 37.18 percent stake, while Foreign Institutional Investors own 12.78 percent. Domestic Institutional Investors and retail investors hold 6.95 percent and 23.18 percent, respectively.
The Government of India also has a significant stake, having reduced its holding from 33.18 percent in December 2023 to 23.18 percent in July 2024.
Financial Performance
In its latest financial update, Vodafone Idea reported net sales of Rs.10,508 crore for Q1 FY25, a 1.4 percent decrease from Rs.10,656 crore in the same quarter last year.
The company’s net losses for the quarter were Rs.6,432 crore, down from Rs.7,840 crore in Q1 FY24. However, the overall financial performance remains weak, reflecting continued financial struggles.
Company Overview
Vodafone Idea, known as Vi, is an Indian telecommunications company created by the merger of Vodafone India and Idea Cellular in August 2018. Vi is the third-largest mobile operator in India, with approximately 219 million subscribers as of April 2024.
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Written by – Siddesh S Raskar
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