Vodafone Idea gets board of directors' nod to raise Rs 1,600 cr from ATC

Board approves issue of debentures

Vodafone Idea (Vi) on Friday got the board of directors’ approval to raise Rs 1,600 crore from American Tower Corporation via optionally convertible debentures (OCDs) and use the proceeds to pay the dues of the tower company.

This comes as a shot in the arm for the financially-stressed telco which has so far struggled to raise capital from investors.

The board approved the issue of 16,000 OCDs having a face value of Rs 10 lakh each to raise Rs 1,600 crore. These would be convertible into equity share of Rs 10 each that will be allotted to ATC Telecom Infrastructure Private Limited on a preferential basis. The debentures will have a coupon rate of 11.2 per cent per annum and will have a term of 18 months.

Vi said the funds raised via debentures will be used to pay pending dues of ATC under the master lease agreement and any remaining amount would be used for general corporate purposes. The company will seek shareholder approval for the issue of OCDs on November 21.

Vi’s inability to raise funds has hindered its payments to vendors and also the rollout of 5G service. The conversion of interest on adjusted gross revenue dues into equity for the government too has not materialized yet.

Last month, Indus Towers asked Vi to pay up its dues by November or face disconnection. Vi had then said it had sought softer payment terms and was in ongoing discussions with the tower company.

The funding delays also resulted in the telco failing to close contracts with telecom gear makers Ericsson and Nokia for 5G equipment. Its rivals Bharti Airtel and Reliance Jio have begun rollout of their 5G service. While Airtel has said it is offering 5G service in eight cities, Jio is carrying out beta trials in four.

Vi, which lost over 15 million subscribers in 12 months ending June, continues to see high customer churn.

Vi’s chief executive officer Akshaya Moondra told shareholders in August that the company will launch 5G service after finalizing fresh funding and contracts with gear makers. Vi acquired 6228 MHz of spectrum in various bands worth Rs 18,799 crore in the recent 5G spectrum auction.

“In the last few quarters, Vi has used its cash flows to reduce bank debt but has been unable to pay its vendors on time. It has struggled to raise fresh capital till now. It will need a lot of investment in network and branding to rejuvenate the company,” a telecom sector analyst said.