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India’s third-largest telecom operator, Vodafone Idea (Vi) has proposed to borrow Rs 23,000 crore in term loans and sought an additional Rs 10,000 crore in bank guarantees, according to a report by The Economic Times. This funding is part of Vi’s strategy to compete with larger telecom rivals Reliance Jio and Airtel in a market by enhancing its 4G coverage and 5G rollout.
Both Reliance Jio and Bharti Airtel have already deployed pan-India 5G networks.
As earlier reported by Business Standard, Vi began considering rolling out 5G on a large scale over six months. The company plans to invest Rs 50,000-55,000 crore over the next three years. Vi also emphasised that while 5G rollout was important, the telecom’s ‘topmost priority’ was to expand and strengthen 4G coverage.
According to ET, Vi’s joint venture between Vodafone Plc and Aditya Birla Group submitted its loan proposal to a State Bank of India (SBI)-led banking consortium a few days back. The funds will go towards upgrading mobile broadband network infrastructure across its 17 priority markets.
Vi’s approach to banks follows its recent arrangement of around Rs 24,000 crore in equity capital, fulfilling a key condition set by lenders for extending fresh loans. Over the past few months, Vi has been negotiating with banks to raise up to Rs 25,000 crore via debt and an additional Rs 10,000 crore in non-fund-based facilities such as bank guarantees.
J P Morgan, after meeting Vi’s CFO Murthy GVAS, noted that some of the targeted $6.6 billion capex will be front-loaded to quickly bridge the gap with competitors.
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The banks will also seek a techno-economic viability (TEV) report from a top consultancy firm to evaluate Vi’s creditworthiness before deciding on the loan sanction.
The news report also noted that some banks remain cautious about increasing their exposure to Vi due to its substantial pending government dues and the highly competitive telecom sector.
As of March 2024, Vodafone Idea has paid Rs 7,854 crore out of its total adjusted gross revenue dues of Rs 58,254 crore, as per the Supreme Court's 2019 order.
Earlier this month, Care Ratings had upgraded Vi to ‘BB+’ with ‘stable’ outlook. The agency also upgraded the company’s short-term bank facilities to CARE A4+ from CARE A4.
Additionally, on June 12, shares of Vodafone Idea hit a three-month high of Rs 16.70, gaining 3 per cent on the BSE. This was led by expectations of earnings improvement. The stock had also registered its 52-week high of Rs 18.42 on January 1, 2024.
Vodafone Idea’s shares were trading at Rs 16.56 on the BSE at 10:30 am on Tuesday.
