India’s Vi splashes $3.6bn on its 4G/5G networks

• India’s third-largest operator, Vodafone Idea (Vi), is investing in its mobile networks in an effort to catch up with market leaders Reliance Jio and Bharti Airtel
• It has added Samsung Networks to its usual mobile network infrastructure vendor roster of Ericsson and Nokia
• The news comes as Vi’s subscriber base shrinks again in July, though it still has almost 216 million mobile connections

After years in the financial and operational doldrums, India’s third-largest telco, Vodafone Idea Ltd. (aka Vi or VIL), has awarded mobile network infrastructure equipment contracts worth 300bn Indian rupees ($3.59bn) to three vendors as it starts the challenging process of playing catchup with market leaders Reliance Jio and Bharti Airtel. 

Vi has been in financial turmoil for a few years now, even teetering on the brink of bankruptcy on a few occasions, but has been raising funds this year through various financial arrangements. It has also struck a deal to pay equipment suppliers Ericsson and Nokia with newly issued shares, and has unveiled a plan to invest up to 550bn Indian rupees ($6.58bn) to expand and upgrade its mobile network infrastructure.

Now the operator, which is jointly owned by the Indian government (23.1% stake), Vodafone Group (22.6%), Aditya Birla Group (14.6%) and public shareholders (39.7%), has kickstarted its network investment programme by awarding contracts to Samsung Networks as well as its traditional suppliers Ericsson and Nokia. 

Vi’s main priority is to expand its 4G coverage from 1.03 billion of the country’s population to 1.2 billion, though it is also adding extra network capacity to improve the service experience of its customers and will start offering 5G services in “key markets”: It is already two years behind Jio and Airtel in the 5G services market, so it has a lot of catching up to do (Jio has more than 108 million 5G customers and Airtel more than 90 million). 

The operator isn’t providing any details about the value of the deals awarded to each vendor, or any technology specifics. However, it’s worth noting that Vi has been exploring the potential of virtual RAN (vRAN) and Open RAN systems, referenced the planned deployment of cloud-based core platforms and Open RAN during a recent investor presentation, and that Samsung’s entry point into mobile operator networks has been with its vRAN/Open RAN solutions. Ericsson and Nokia, of course, also offer such technology options as part of their radio access network product portfolios.   

Vi’s CEO, Akshaya Moondra, noted: “We are committed to investing in emerging network technologies to provide a best-in-class experience to our customers. We have kickstarted the investment cycle. We are on our journey of VIL 2.0 and from hereon, VIL will stage a smart turnaround to effectively participate in the industry growth opportunities. Nokia and Ericsson have been our partners since our inception and this marks another milestone in that continuing partnership. We are pleased to start our new partnership with Samsung. We look forward to working closely with all our partners as we move into the 5G era.” 

News of positive steps by Vi boosted the operator’s share price by 3.9% on India’s National Stock Exchange (NSE) to 10.88 rupees, giving it a market capitalisation of 756bn rupees ($9bn). 

It should be noted, though, that Vi’s financial woes are far from over and it now faces another federal payments challenge after the Supreme Court dismissed petitions from Vi and other network operators regarding the re-evaluation of adjusted gross revenue (AGR) dues. According to The Economic Times,  Vi still owes the Indian government more than 703bn rupees ($8.4bn) in AGR-related dues as well as 1,331bn rupees ($15.9bn) in deferred spectrum licence payments: This explains why the Indian government is very keen for Vi to avoid bankruptcy and stay in business. 

Vi is currently generating quarterly revenues of around 105bn rupees ($1.26bn) and EBITDA of some 21bn rupees ($250m).

News of the contract awards and AGR ruling came as the Telecom Regulatory Authority of India (TRAI) unveiled the latest market statistics for July, which showed that Vi continued to lose customers. It ended July with 215.9 million mobile connections, down 1.4 million over the course of the month, to give it a market share of 18.46%.

Unusually, both Jio and Airtel also lost customers during July, a trend that has been blamed on their recent tariff increases. Jio ended July with 475.8 million mobile connections (down by about 758,000) to give it a market share of 40.68%, while Airtel had 387.3 million mobile connections (down 1.7 million) for a market share of 33.12%. 

The beneficiary of those declines was state-owned operator BSNL (which operates across all of India except in Delhi and Mumbai): As users looked for better deals it increased its number of mobile connections in July, picking up 293,000 customers to reach a total of 88.5 million for a market share of 7.59%.

India ended July with 1.17 billion mobile connections: It is the second-largest mobile market in the world after China. 

- Ray Le Maistre, Editorial Director, TelecomTV