The Indian operator, in which has Vodafone has an almost 23% holding, is under increasing pressure as it strives to pay off $42.17bn debt
Vodafone Idea (Vi) is to issue shares worth INR24.58 billion (€294.2 million) to network equipment vendors Ericsson and Nokia. In a statement, the Indian telco said it’s part of its strategy to clear net debt which stands at $42.17 billion. This includes INR2.03 trillion to the Indian government, INR 40.4 billion rupees to financial institutions and INR135 billion to equipment vendors and Indus Towers.
Vi said it will issue 1.66 billion shares to the two vendors. Nokia Solutions will receive 1.03 billion shares worth INR15.20 billion and 633 million shares to Ericsson India worth INR9.38 billion
This will give Nokia a 1.5% stake in Vi and Ericsson a 0.9% holding.
Efforts to steady the ship
Vodafone and Idea Cellular formed Vodafone Idea (Vi) in August 2018. Both were struggling after the huge and rapid success of Reliance Jio in the market, and with the Indian authorities’ apparently abrupt changes in the way they calculated tax, interest, penalties and shifted parameters.
In July 2020, Vi reported the biggest loss ever by an Indian firm and Vodafone threatened to shut up shop in India. As the stand-off between Vodafone and the authorities continued, the government took a majority shareholding of 35.8% in Vi in February 2023, converting outstanding liabilities into equity. The value of its holding had risen almost a third in the last year, as of May.
A follow-on public offer in April 2024 reduced the government’s shareholding to just under 25%, as Vi raised $2.16 billion through offering new shares. Vodafone Group is the second largest stakeholder with 22.87%.
Outstanding debt
Despite this, the financial fallout has continued for Vi, which is behind on payments to its tower and equipment vendors, owing them a total of INR135 billion.
Vi owes Indus Towers $1.2 billion. It is India’s biggest towerco and one of the largest in the world. Indus has almost 220,000 towers and offers power, space and green solutions for tower equipment.
Earlier this month, Indus’ Chair, Sunil Bharti Mittal, told Vi to pay up or lose access to the towers and lag even further on 5G deployment. India’s second biggest telecom firm, Bharti Airtel, is also a shareholder in Indus. Airtel is the flagship company within Bharti Enterprises, of which Mittal is founder and chair.
Vi is yet to launch a 5G network, but both its rivals, Bharti Airtel and Reliance Jio are in the throes of implementation.
Hard to sell Indus stake?
This is not the first time Mittal has threatened action if Vi didn’t pay what it owes. Vi first announced it would sell off its holding in Indus Towers in 2022 in response to Mittal’s demands for payment. Since then, it has reduced its stake from 28% to 21.5%, finding limited appetite among investors, including other operators, to buy its shares.
Vodafone’s owns its stake in Indus via various entities within the group, which was valued at $2.3 billion at the end of last week.
For the quarter that ended in March 2024, Indus’ net profit rose 20% to $221 million although revenue stayed flat at $860 million, according to regulatory filings.
The Reuters story cites unnamed stories and when it became public caused the share price of Vodafone Idea (Vi) in which Vodafone has a minority share to rise almost 5%, but it had little effect on Indus Towers.
Private equity giant KKR and Canadian fund CPPIB were investors in Indus, but sold their entire stakes in February.