Vodafone Idea faces survival crisis, needs funds by Feb 2023

While the government wants promoters to infuse more capital, the Vodafone Group has made it clear that it would not invest any fresh equity into its Indian joint venture

Vodafone Idea could have trouble surviving if its promoters, Vodafone Plc and Aditya Bira Group do not infuse capital by early 2023, as per a report in The Economic Times.

“If a fresh capital infusion from Vi’s promoters does not come by January-February, it will become difficult for the telco to survive,” said a senior government official told the publication. “The (equity) conversion can happen if the company shares a clear investment plan, including promoter fund infusion,” he added. However, if the conversion does not take place, then it would be a task for Vi to get external investors or even raise debts which is the need of the hour for the telco company in order to clear vendor dues, expand 4G and roll out 5G.

The Vodafone Group has made it clear that it would not invest any fresh equity into its Indian joint venture, Vodafone Idea.

Vi promoters had reportedly assured investment of Rs 10,000 crore after the government finalised the telecom sector revival package in September 2021. Practicing one of the clauses of the package, in January Vi opted for deferral option after which Vi has received only a little over Rs 4,900 crore from promoters, most of which has been used for clearing dues to its tower company Indus Towers.

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“Without more capital infusion from promoters, Vi won’t have any cash to grow its operations or meet its sizeable vendor dues and could be headed towards bankruptcy; in such a situation, a potential 33 per cent government stake in Vi won’t have any value, which could be a possible reason behind the delay at the government’s end to do the conversion,” said Rohan Dhamija, head (India & Middle East) at Analysys Mason.

Another hurdle that is preventing fresh investment is the stepping down of the Vodafone group Ceo Nick Read.

Senior director at ratings agency Fitch estimated a requirement of over $3 billion to be raised in the next year for the telco to reach its short term liquidity pressure.

The company’s net loss for the September quarter widened to stand at Rs 7,595.5 crore at present. If it is unable to keep up with its peers in terms of 5G rollout, the company is estimated to lose more revenue in the coming years.