A delayed call

Revival of Vodafone Idea remains a challenge

The board of Vodafone Idea has approved a fundraise of Rs 45,000 crore, in equity and debt, signalling a revival of the financially stressed telecom service provider. Although it is a step in the right direction, the decision fell short of expectations. Reflecting the market mood, the Vodafone Idea stock crashed about 14 per cent to Rs 13.65 on the National Stock Exchange on Wednesday, a day after the fundraise announcement. Operationally, the latest measure may help the company strengthen its 4G coverage, roll out 5G services, and contain the sharp decline in subscriber numbers. However, at the same time, the proposal is being seen as too little too late. The magnitude of the telco’s debt and losses explains why raising Rs 45,000 crore will not be a long-term solution. At the last count, Vodafone Idea had a debt pile of Rs 2.5 trillion, and it reported a net loss of Rs 6,985 crore in the December quarter. Its overall subscriber base was 215 million and market share less than 20 per cent at the end of last year, as it continued to lose customers to rivals.

The company, which is a distant third in subscriber numbers — behind Reliance Jio and Bharti Airtel — had earlier talked about fundraising plans several times without any movement on the ground. That raises doubts over the Rs 45,000 crore fundraise plan, too. Also, the many layers in the proposed funding round could delay the process. For instance, promoters had last August committed to infusing Rs 2,000 crore into the debt-laden company. This commitment, made six months ago, is built into the company’s latest announcement as well. Besides, it’s not clear which promoter will put in the funds. The UK’s Vodafone Group, which has a 32.3 per cent stake in Vodafone Idea, has maintained that it will not invest in the loss-making telco. The Aditya Birla group, which holds 18.1 per cent, has also not invested significantly in the business for years. The biggest shareholder in the company is the Union government, with a 33 per cent stake.

The overall plan, according to the company statement, includes raising Rs 20,000 crore capital through a mix of equity and equity-linked instruments by bringing in an external investor. Getting an external investor has remained a problem for the group, in addition to the other concerns. If Vodafone Idea is able to translate its fundraising plan into action and also raise tariffs to start reviving its business, the fear of a duopoly in the Indian telecom market may fade away gradually. But it seems a long haul before the telco’s revival road map will get subscribers’ or investors’ confidence. Apart from raising funds externally, the promoters, including Newbury-headquartered Vodafone Plc, must invest in the India business, which it had entered with much fanfare in 2007. Though then chief executive officer Nick Read had said in an earnings call in 2021 that Vodafone Plc would not put any additional equity into India, the company has to change its stand to make sure its joint venture with the Aditya Birla group is able to invest into 4G, 5G and network capacity to remain relevant in the Indian market.