Vodafone India raises $600 million, but it's still not enough

Vodafone Idea (Vi) is getting an equity funding injection of close to US$600 million from a trio of entities owned by its existing shareholders.

While that sounds like good news for the troubled Indian telco, it will only have a quarter of the sum at its disposal, with the lion’s share going to pay monies owned to passive infrastructure specialist Indus Towers. And ultimately, that is not going to help Vi in its quest to build out network and compete with the bigger rivals that are fast leaving it behind in India’s highly competitive mobile market.

Vi’s board of directors on Thursday voted in favour of the share allotment plan presented by the company a few weeks ago. The scheme will see Euro Pacific Securities, Prime Metals, and Oriana Investments – the first two being controlled by the Vodafone Group, the last by Aditya Birla Group – pick up 3.4 million equity shares between them for a combined total of 45 billion rupees (US$595 million).

“Subscription monies received from Euro Pacific Securities and Prime Metals would be used for making payments due to Indus Towers Limited under the terms of the master service agreements executed between the Company and Indus for the provision of passive infrastructure services,” Vi said. “Subscription money received from Oriana Investments will be used towards general corporate purposes.”

Oriana Investments’ contribution comes in at $149 million. And that doesn’t stretch very far in the world of mobile infrastructure, particularly when you have a customer base of 265 million to serve over a vast geographic area.

That’s according to the latest data from the Telecom Regulatory Authority of India (TRAI), which published figures for the end of January on Wednesday.

As such, Vi lost 395,000 customers in January, which is a big improvement on the 1.6 million it lost in December, but continues a downward trend that has been in evidence for many months. As such, Vi had a 23% share of the Indian mobile market as of end-January, which is actually relatively flat in recent terms, but a far cry from the nearly 38% the firm claimed on 31 August 2018, when the merger between Vodafone and Idea Cellular was finalised.

A lot has changed since then. The dominance of Reliance Jio, for one thing, which has seen its market share grow to 35.5% – eclipsing one-time leader Bharti Airtel – from 20.5%.

The past few years have been characterised by a cash crunch for Vi, which has battled a hefty debt burden and been weighed down by billions of dollars owed to the government in revenue dues and spectrum payments. September’s relief package brought some hope on the subject of government dues, and the state subsequently agreed to take control of one-third of the telco in return for deferring debts, but its finances still do not look healthy. Recent quarterlies show declines in revenues and earnings, and at the end of last year the telco’s net debt stood at around $26 billion.

Meanwhile, the company is under pressure to invest in its 4G infrastructure and the government is close to finalising the details of India’s upcoming 5G auction, due to take place later this year. The Press Trust of India reported earlier this week that a TRAI announcement on the pricing of 5G frequencies is due to be published in a matter of days.

All of which shows that Vi is still struggling and further spending looms large. That $149 million for general corporate purposes is starting to look like a drop in the ocean.

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