Vodafone Idea to pay Nokia and Ericsson with newly-issued shares

• India's Vodafone Idea is trying to get itself on an even financial keel
• It has been raising funds to shore up its balance sheet and prepare for a 5G rollout
• Its board has approved the issuance of new shares that will be used to pay off what it currently owes Nokia and Ericsson

The board of India’s third largest mobile operator, the financially strapped Vodafone Idea (aka VI or VIL), has approved the issuance of new stock worth almost 24.6bn rupees ($294m) that it will use as payments to two of its main vendor suppliers.

Subject to investor approval, stock worth 15.2bn rupees ($182m) will be awarded to Nokia Solutions and Networks India, giving it a 1.5% stake in the operator, while shares with a value of 9.38bn rupees ($112m) will be awarded to Ericsson India, which will hold a 0.9% stake.

Vodafone Group and Aditya Birla Group will jointly hold a 37.3% stake, the Indian government will own a 23.2% stake and the remaining 37.1% by public shareholders.

An investor meeting has been called for 10 July to vote on the proposed move.

“Nokia and Ericsson both have a long-term partnership with VIL, as key suppliers of network equipment, and this preferential allotment will enable VIL to clear part of their outstanding dues,” noted the operator, which ended March with 219.8 million mobile connections for an 18.9% share of India’s total mobile user base. “It further bolsters VIL’s capex rollout for building a top quality 4G and 5G network to contribute towards India’s digital transformation,” added VIL.

If investors approve the new shares issue it will take the total raised by VIL in recent months to 240bn rupees ($2.87bn), including 180bn rupees ($2.15bn) through its recent follow-on public offer (FPO), a financial instrument via which an existing company already listed on a stock exchange can issue new shares.

The operator is also still in discussions to raise up to 250bn rupees ($3bn) in new bank debt facilities and is looking to raise a further 100bn rupees ($1.2bn) from other sources so it can secure its financial footing and invest in its 5G network: It is already almost a year behind its main rivals, Reliance Jio and Bharti Airtel, in India’s 5G services market.

VIL plans to invest between 500bn and 550bn rupees ($6bn to $6.6bn) in its network infrastructure over the next three years. “The capex will be towards expanding 4G population coverage in 17 priority circles [service areas], 5G launch in key cities/geographies and capacity expansion to address the increasing data demand,” the operator stated rtecently.

It noted in an investor presentation that much of its existing radio access network (RAN) is “5G ready” and that it intends to deploy “disaggregated RAN” – virtual RAN and Open RAN – technology to enable “cost efficiencies”. Vodafone Idea has already conducted an Open RAN pilot using radio units and software from Mavenir and a cloud platform from Red Hat. 

- Ray Le Maistre, Editorial Director, TelecomTV