Vodafone Idea shares have risen over 23% in the past three months compared with a 5% rise in the benchmark Nifty 50 index.
Vodafone Idea Limited (VIL), India’s leading telecom operator, received a much-needed shot in the arm. The company’s board of directors approved the issuance of shares worth a whopping Rs 2,458 crore (approximately $310 million) to telecom equipment giants Ericsson India and Nokia Solutions and Networks India.
This strategic move is expected to significantly boost Vi’s efforts to build a robust 4G and 5G network infrastructure, furthering India’s digital transformation journey.
Analysts on Vodafone Idea Shares
Analysts believe that the equity issue will have several positive impacts on Vi. Ericsson and Nokia are leading companies in telecom network equipment, so Vi can leverage their expertise and technology to build a high-quality, future-proof network.
The equity issue represents a strategic partnership between Vi, Ericsson and Nokia. The fact that well-established companies like Ericsson and Nokia are willing to invest in Vi is a positive signal to the broader investor community. This is likely to improve investor sentiment towards Vi and lead to further investments in the company.
The fact that established companies like Ericsson and Nokia are willing to invest in VIL is a positive signal to the broader investor community.
Vi’s Recent Capital Raise of Rs 24,000 Crore
Vi shares closed nearly 2.3% lower at Rs 16.07 on the BSE, taking the telco’s market capitalization to Rs 1.9 trillion. After the share issue, Nokia and Ericsson will hold 1.5% and 0.9% respectively in Vi. Founders Britain’s Aditya Birla Group and Vodafone Group will own 22.8% and 14.5% respectively, while the state will hold 23.2%.
The remaining 37.1% will be held by the public. With the recent share issue, Vi has raised around Rs 24,000 crore of equity capital in the past few months. The company further said it is in active discussions with lenders to raise debt capital of Rs 25,000 crore.
“Nokia and Ericsson have long-term partnerships with Vi as key suppliers of network equipment and this preferential allocation will enable VIL to repay a portion of its outstanding debt,” the company said in a statement.
Before the share issue, Vi owed over 120 billion to Ericsson and around 300 billion to Nokia, people familiar with the matter said.
Significant Set Growth in Motion
Birla said that the proceeds from the fundraise have been earmarked for network and technology upgrades in “key markets” through a “significant” increase in capital expenditure.
Since the fundraise plan was approved by Vi’s board earlier in the year there have been promises of investment in the operator’s 4G network and a wider launch of a nascent 5G service. “The cycle of investment will therefore trigger the cycle of growth”, Birla said.
He hopes that the funds will bolster Vi’s bid to provide genuine competition to larger rivals Bharti Airtel and Reliance Jio, both of which already have widely available 5G networks.
Most of the proceeds are to go towards installing 4G and 5G on more sites, and expanding capacity on existing 4G sites.
The operator plans to spend INR 128bn of the net proceeds on network expansion, while INR 22bn is earmarked for deferred spectrum payments to the Department of Telecommunications and Goods and Services Tax, according to the FPO prospectus.
Vi’s Network Expansion
This development will have significant implications for India’s telecom sector as a whole. Increased competition from a resurgent VIL is likely to lead to lower tariffs and improved services to consumers.
Furthermore, Vi’s network expansion will help bridge India’s digital divide, bringing the benefits of high-speed internet to more people. Vodafone Idea’s issuance of shares to Ericsson and Nokia is a positive development for the company and India’s telecom sector.
While challenges remain, VIL has a unique opportunity to leverage this strategic partnership and emerge as a formidable competitor in the 5G era. The success of this venture will be closely watched by industry players, investors, and consumers alike.
