Vodafone Idea hits over 5-year high; stock zooms 68% against FPO price

Vodafone Idea's higher-than-expected spectrum spends to boost network experience is a positive move, said Kotak Institutional Equities

Vodafone Idea shares: Shares of Vodafone Idea hit an over five-year high of Rs 18.50, gaining nearly 3 per cent on the BSE in Thursday's intraday trade, amid heavy volumes. The stock of the telecom services provider was trading at its highest level since March 29, 2019, the day it turned ex-rights.

Shares of Vodafone Idea ended the day at Rs 18.52 levels on the BSE on Thursday, up 2.77 per cent.

Thus far in the month of June, Vodafone Idea stock has outperformed the market by surging 21 per cent. In comparison, the BSE Sensex was up 7 per cent during the period. With the current month's rally, market price of Vodafone Idea has zoomed 68 per cent against its follow-on public (FPO) price of Rs 11 per share. In April, the company had raised Rs 18,000 crore via FPO route.

So far in the current calendar year 2024, the company has raised around Rs 24,000 crore of equity (including proposed preferential issue of Rs 2,458 crore to Nokia and Ericsson which is subject to approval by shareholders) and is in active discussions with its lenders to raise debt funding of up to Rs 25,000 crore.

Meanwhile, Vodafone Idea, announced after market hours on Wednesday, the acquisition of 50 MHz of spectrum across low band and mid band spectrum (900 MHz, 1800 MHz and 2500 MHz) in 11 circles at a total commitment of Rs 3,510 crore, in the spectrum auction concluded yesterday.

In addition to the renewal of 900 MHz spectrum in UP West and West Bengal circles, the company has also enhanced its 900 MHz spectrum holding in seven circles, namely Andhra Pradesh, Tamil Nadu, Karnataka, Punjab, Rajasthan, UP East, and Kolkata, enabling it to dedicate adequate 900 MHz band spectrum for 4G thereby enhancing the experience of its 4G customers in these large markets, particularly the indoor experience. CLICK HERE FOR FULL STATEMENT

Vodafone Idea said this spectrum acquisition along with the comprehensive fund raise (equity and debt) will empower the company to work towards executing its well-defined strategy including expansion of its 4G coverage and launch of 5G services and to participate in the large and significant opportunities offered by the Indian wireless sector.

The company, with a strong subscriber base of 212.6 million (March 31, 2024), 4G population coverage of over 1 billion Indians, competitive spectrum profile, extensive distribution reach and a well-established brand along with differentiated digital offerings, is well positioned to effectively compete in the market, Vodafone Idea said.

Vodafone Idea had ~12 MHz spectrum up for renewal, but it acquired higher 30 MHz spectrum across 900, 1800 and 2500 MHz bands. Vodafone Idea’s overall outlay of Rs 3,500 crore (Rs 350 crore in annual installments) was higher than our base-case expectation of ~Rs 1,500 crore as it acquired 900MHz spectrum in 9 circles to improve 4G coverage, Kotak Institutional Equities said in their sector report.

Vodafone Idea also acquired spectrum in mid-band in MP and Bihar circles to improve network capacity. Overall, the brokerage views Vodafone Idea’s higher-than-expected spectrum spends to boost network experience as a positive move. With the spectrum auction behind us, Kotak Institutional Equities believes the focus will now shift toward tariff hikes in the coming days.