Vodafone Idea board to mull issuing convertible debentures to a vendor

Development comes on the heels of Indus Towers warning the financially stressed telecom company of disconnection of services over non-payment of dues

The board of Vodafone Idea (Vi) will meet on Friday to discuss issuing convertible debentures to a vendor.

Vi on Wednesday informed stock exchanges that its board will meet to consider and evaluate the issue of debentures that can be converted into equity shares on a preferential or a private allotment basis. The issue of debentures will be subject to approvals from regulators and shareholders.

The development comes within 20 days of Indus Towers warning the financially stressed telecom company to clear its dues by November or face disconnection. Vi did not disclose further details about the proposal. Vi has struggled to raise funds and that has hindered its payments to vendors and launch of its 5G service. The conversion of interest on adjusted gross revenue dues into equity for the government too has not materialised yet.

Vi’s dues with Indus are said to be over Rs 7,000 crore and the tower company recently made a provision in its books considering recovery challenges.  It reportedly owes Rs 2,000 crore to American Tower Corporation. At the time, Vi said it was in discussions with Indus for softer payment terms. The telecom operator had earlier suggested that it would make a part payment till December and a full payment thereafter, along with clearance of old dues till July 2023.

A senior executive at one of the vendors said Vi had mooted the idea of convertible debentures three-four months ago and discussions were held. “We could consider that but after equity issuance by Vi to the government. Vi is also looking to raise debt from banks. There has to be clarity on that.”

Vi’s Chief Executive Officer Akshaya Moondra had told shareholders in August that the company will launch 5G service after finalising fresh funding and contracts with gear makers. 

Vi acquired 6,228 MHz of spectrum in various bands worth Rs 18,799 crore in the recent 5G spectrum auction. It purchased spectrum in the 3,300 MHz band in 17 of its priority circles and in the 26-GHz band in 16 circles enabling last-mile connectivity.

Vi’s stock closed at Rs 8.52 on the BSE on Thursday gaining 0.6 per cent.