Vodafone Idea in talks with Amazon, PEs for Rs 20,000 cr investment

American retail major Amazon and a clutch of investors are in talks with Aditya Birla Group to invest up to Rs 20,000 crore in the latter’s struggling wireless telephone company, Vodafone Idea.

The proceeds of the sale will be used to bid for the upcoming 5G auction of spectrum and capital expenditure for the roll-out of services by year-end, say banking sources. Apart from Amazon, the group is talking to private equity investors planning to take an exposure to the telecom sector in India.

“Talks are on with several players and an announcement on new investors is expected soon,” said a banking source. “They are about getting equity investment of up to Rs 10,000 crore and the rest is likely to be in debt,” the source added.

The spokespersons of Aditya Birla Group and Amazon declined to comment.

The shares of Vodafone Idea closed up 4.14 per cent to Rs 9.3 a share, giving the company a valuation of Rs 29,870 crore as on Monday.

The new investors have raised questions on the role of the government once the latter picks up a stake in the company in lieu of its dues. The company has decided that the effective date for calculating the net present value (NPV) of the interest to be converted into equity (by the government) will be January 10. 

The NPV of the interest liability on the moratorium period amounts to Rs 16,130 crore towards AGR (adjusted gross revenues) and deferred spectrum liabilities.

Turnaround plan 

• New investors to bring in fresh equity for 5G auction, roll-out
• Govt to pick up 33% stake in Voda Idea before 5G auction
• Investors seek clarity on govt role in management
• Existing promoters to invest Rs 4,500 cr via preferential allotment of shares
• Govt returns bank guarantees worth Rs 16,000 cr

“The investor will come in once this process (government acquiring stake) has been completed,” the source said. The investors became interested in putting money in Vodafone Idea after the government took steps to help the telecom sector.

In March this year, the Department of Telecommunications issued a direction to return the financial bank guarantees related to past spectrum auctions to the company. To date, bank guarantees worth Rs 16,000 crore have been returned, thus helping the company financially.

Besides, both promoters -- Aditya Birla Group and Vodafone plc -- have invested in the telco through a fresh preferential equity infusion of Rs 4,500 crore. The shares were issued to the promoters at Rs 13.3 per equity share. Of this, Vodafone contributed Rs 3,375 crore and Aditya Birla Group Rs 1,125 crore.

The combined shareholding of the promoters after the preferential issue is 74.99 per cent. After converting interest into equity, the government shareholding is expected to be 33 per cent.

The company is keen to invest in 5G technology-based services after its successful testing in Pune and Gandhinagar. Following the consultation on 5G pricing, the Telecom Regulatory Authority of India (Trai) has incorporated several requests from the industry and 5G spectrum pricing has come down by 36 per cent from its initial estimates.

Trai also recommended the spectrum payments to be spread over the life of the spectrum as compared to 50 per cent upfront payment as in the previous auction, another step to help the operators manage their cash flows efficiently.