Vodafone set to plough another $120m into India

Vodafone Idea is reportedly set to receive an equity infusion worth around US$1.7 billion, with its UK parent contributing a chunk of the total.

So claims the Economic Times, whose unnamed sources privy to discussions around the telco’s financial future noted that Vi shareholders Vodafone and Aditya Birla group are on the hook for half of an infusion of 140 billion-rupee ($1.7 billion) in equity as part of a turnaround plan for the troubled telco.

The parent companies have already invested INR50 billion of fresh equity since the government’s telecom revival package in September 2021, the paper said, citing a business plan submitted to the state earlier this month, leaving them with INR20 billion still to go, or around $120 million each, presuming a 50:50 split.

The plan will see Vodafone and Aditya Birla work with the company to raise the remaining INR70 billion either as direct equity or through convertible structures from external investors, the sources said.

The report backs up a recent comment from Vodafone Group that the Indian business needs more financial support. Specifically, Vi “remains in need of additional liquidity support from its lenders and intends to raise additional funding,” Vodafone said in the notes to its latest full-year financial statement, published last month.

Vodafone won’t provide more cash, it said at the time, while also pointing out that it has reduced the carrying value of its investment in Vi to zero, but if the press reports are correct, that clearly does not include an equity infusion.

It’s a lift Vi badly needs, as evidenced by the fact that the company’s shares jumped up as the news emerged on Wednesday.

Its troubles are well documented, from balance sheet issues, to government dues and a falling customer base.

On that last point, Vi lost 1.2 million mobile customers in March alone, according to the latest data from the Telecom Regulatory Authority of India (TRAI), leaving it with a market share of less than 21%. That might seem like a sizeable slice of the market, until you consider that at the time that Vodafone India finally merged with Idea Cellular in August 2018 the resulting entity had about 38%.

Less than a year after that merger was completed we were already talking about Vodafone Idea’s potential demise, but the telco has somehow clung on.

In addition to its financial woes, Vi is also dealing with the fallout from its failure to launch 5G services at a time when major rivals Bharti Airtel and Reliance Jio are making a lot of noise about their own new-generation offerings. State-owned BSNL is now in a position to bring 4G and 5G services to market after the government approved its third bailout plan, worth almost US$11 billion,  last week, which piles further pressure on Vi.

The reported equity infusion would help, of course. But Vi has been under the cosh for so long that it’s hard to imagine anything short of a major overhaul will make much difference.

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