Vodafone Idea again in talks with Amazon and Verizon to raise $4 billion

Vodafone Idea Verizon Amazon India
Credit: Sudhamshu / Flickr.com

US-based eCommerce major Amazon and Verizon Communications have reportedly resumed their talks with India’s struggling telco Vodafone Idea to buy a significant stake for over $4 billion.

While the talks have resumed, the ailing Indian telco has itself started the work to immediately raise $1.5 billion through rights issue and asset sale, as per multiple local reports.

The telecom operator’s board of directors will meet on September 4, 2020 to discuss fundraising plans.

The board at the meeting will “consider and evaluate any and all proposals for raising of funds in one or more tranches by way of a public issue, preferential allotment, private placement, including a qualified institutions placement or through any other permissible mode and/or combination thereof…by way of issue of equity shares or by way of issue of any instruments,” the telecom operator said in a stock exchange filing said.

A report in Mint said that Vodafone Idea had begun talks with Amazon and Verizon earlier this year, but the talks were paused because of the Supreme Court hearings in the AGR case, which brought uncertainty over the telco’s future.

India’s Supreme Court on Monday gave partial relief to telecom operators like Vodafone Idea and Bharti Airtel and has ordered them to pay 10% of AGR liabilities by March 31, 2021 and pay the remaining amount in 10 installments starting March 31, 2022. 

Vodafone Idea has now received clarity on its future in India, and is no longer considering bankruptcy. Analysts said that the telco doesn’t need to make any immediate payments as the court has allowed 10 years to pay $6.8 billion in outstanding AGR fees. 

Encouraged by the verdict, the telco has started work to raise funds to pay these dues and to invest in its pan-Indian telecom networks which requires expansion and upgrading. Due to the cash-crunch, the telco’s network integration missed various deadlines, which has resulted in a bad network experience leading to a mass exodus of subscribers.

A report by the Economic Times, citing various company sources, said on Wednesday that the telecom operator needs to quickly raise at least $3-4 billion through a combination of capital infusion by promoters, rights issue and potential sale of fibre and data-centre assets.

Financial Times had previously reported that Google was in talks to acquire a 5% stake in Vodafone Idea. The US-based internet maker, however, bought stake in Jio Platforms for $4.5 billion.

Vodafone Idea, which is a joint venture between Vodafone Group and billionaire Kumar Mangalam Birla’s Aditya Birla Group, has over $15.61 net debt and has posted eight straight quarterly losses.

Vodafone Idea had only $472.97 million in cash at the end of first quarter of the current fiscal.

With the additional burden of AGR payments and spectrum repayments resuming in the fiscal 2023, Vodafone Idea’s ARPUs need to be Rs200 ($2.73) in the near term as compared to Rs114 ($1.55) in the first quarter, Morgan Stanley said in a report. 

“Vodafone Idea has been burning cash every quarter despite CAPEX being significantly lower than its peers,” it added.

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