Cash-strapped Vodafone Idea to shutdown 3G; to close fundraising soon

Vodafone Idea 3G 4G
Image by VidEst | Bigstockphoto

India’s Vodafone Idea is planning to shut down its 3G services completely by FY22 to become a 4G-focused telecom operator in a bid to drive revenues. A top executive also revealed that it will “soon” close fundraising with potential investors who are “very positive”.

This comes at a time when the struggling telecom operator managed to limit customer losses in the December quarter to 2 million from 8.1 million in the previous one with the help of improving 4G services and a revival in the usage of multiple SIMs.

Fitch Ratings’ Nitin Soni said that the telco managed to rein in customer losses, primarily as multiple-SIM usage seems to be happening once more with migrants returning to cities and using their feature phones regularly.

The telco’s Chief Financial Officer Akshaya Moondra Monday told analysts that 3G is no longer required in the country. “It has been continued; only because some people have devices which can be used only on 3G and not on 4G..ideally, we should be done with our 3G closure in FY22.”

Vodafone Idea, which last year rebranded to Vi, has around 11 million 3G users. However, it will continue to offer its 2G services as 149 million subscribers still use the old-generation technology through feature phones.

Bharti Airtel has already discontinued its 3G services and has re-farmed spectrum to enhance 4G coverage and capacity in the country. Jio, on the other hand, offers only 4G services.

Vodafone Idea on Saturday narrowed its net loss to Rs 4540.8 crore ($621.92 million) for the fiscal third quarter with the help of a cost optimisation plan and addition of 4G users. It had reported Rs 7203.4 crore ($986.77 million) in the second quarter of the fiscal.

ICICI Securities, in a note, said that the telco showed improvements in its financials with lower subscriber loss, better gross additions of subscribers, higher 4G net adds and a rise in data usage, but it is still not enough. “With the AGR case behind, it  will need to bounce back stronger, with limited resources, to remain a going concern.”

It added that CAPEX for the telco is contingent on fundraising and any delay may hurt it further. “It requires tariff hike soon to boost operational cash flow. VIL may initiate tariff hikes, which should be followed by competition (same as Dec’19), we believe.”

On Monday, the senior management revealed that the telco will soon close the fundraising and is currently in active talks with potential investors. A consortium led by Oak Hill Advisors is reportedly in advanced talks with the telco for a $2-billion credit line.

“We are very well engaged and that there is interest from various participants in helping us with fundraising,” Ravinder Takkar, CEO and MD of Vodafone Idea told analysts, adding that the demand for investing in the telco was “very positive”.

On 5G, Takkar said that the telco’s network is 5G ready and took a dig at Bharti Airtel by saying, “…interesting that competitors are showing DSR (dynamic spectrum refarming) in a lab environment when we have been practically running 1000s of sites in a production environment for a very long period of time.”

Bharti Airtel recently demonstrated 5G services on its commercial 4G network in the 1800 MHz band in Hyderabad city. It said that it can launch commercial 5G services using spectrum which is being used for 4G services in the country.

Takkar said that the 5G ecosystem needs enough user case studies and spectrum in the 3500 Mhz band or mid-band, along with affordable handsets.

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