Investment Talks In Progress: Vodafone Idea CEO
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Investment Talks In Progress: Vodafone Idea CEO

Vodafone Idea (Vi) has experienced an uptick in discussions with banks, promoters, and external investors to raise funds in recent weeks.

Akshaya Moondra, the company’s CEO, revealed that these discussions have gained momentum following the implementation of most provisions of the telecom relief package.

It may ne recalled that Vi has been grappling with financial difficulties and is aiming to secure Rs 20,000 crore in funds to improve its capital expenditure and enhance its competitiveness in the market. Potential funders are keen on ensuring that the government’s reforms package is fully implemented before committing their support.

Previously, talks were hindered by a delay in issuing shares to the government to settle interest arrears on statutory payments. However, with this obstacle now resolved, discussions have gained pace. The return of Kumar Mangalam Birla, chairman of Aditya Birla Group, to the Vi board has also been received positively by investors.

As a result, Vi’s shares ended 1.14 per cent higher on the Bombay Stock Exchange (BSE) after the company reported a narrower net loss for the fiscal fourth quarter compared to the previous quarter. The reduction in interest and financing costs and a slowdown in subscriber losses contributed to this improvement.

Vi’s financial struggles have limited its capital expenditure on its 4G network and hindered its efforts to launch 5G services. The company aims to utilise the funds raised to enhance its capital expenditure for the 5G rollout and expand its 4G coverage. All business plans presented to banks and external investors include proposals for the deployment of 5G technology.

Meanwhile, Vi has taken steps to improve its average revenue per user (ARPU) by reducing the validity of its entry-level prepaid pack in Mumbai. The company plans to observe the outcomes of this strategy before implementing it in other markets. However, Moondra emphasised the need for a broader change in the industry’s pricing structure, as the current tariffs do not generate satisfactory returns on the capital invested by operators.

The last tariff hikes in India occurred in November-December 2021, leading to Vi’s first annual revenue growth since the merger between Vodafone Group and Idea Cellular in 2018. Analysts believe that future tariff hikes will play a vital role in the telco’s financial health. Vi also aims to enhance the quality of its customer mix. While the company may not currently take the lead in tariff hikes, it plans to do so as it enters investment mode and expands its 4G coverage. Moondra emphasised the importance of tariffs reflecting the industry’s costs.

Regarding the delay in the 5G rollout, Vi does not currently see a major impact on customer churn. Moondra noted that the company witnessed a reduction in churn in the last quarter due to major investments made by competitors in 5G. However, there are challenges for consumers adopting 5G, such as battery usage and understanding 5G tariffs.

He highlighted that while competitors like Bharti Airtel and Reliance Jio are currently offering free 5G data, this approach may not be sustainable. Once 5G services are charged, the challenge will be to ensure that consumers receive a beneficial experience.

Moondra acknowledged that having a 5G offering will be necessary in the long run for all telecom companies. However, the extent and coverage of the 5G rollout will be determined over time.

While Vi’s rivals have already launched 5G services and aim for extensive coverage by the end of the current fiscal year, Vi is yet to announce its specific 5G rollout plans.

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