Vodafone Idea, India’s only loss-making telecom operator, has begun exploratory talks with TPG Global, Apollo Global, and Carlyle Group among other private equity companies to raise around $1 billion by divesting stakes in its fiber broadband subsidiary and fiber and data center assets.
The cash-strapped operator is looking to sign the deal on a “sale-and-leaseback basis” as it will continue to use its optical fiber infrastructure and data centers to support its operations, including the enterprise business, Hindustan Times reported on Thursday.
Vodafone Idea is in a dire need to raise funds to support its operations and clear spectrum and other statutory dues. It has been trying to raise $2-2.5 billion through a mix of debt and equity since last October. However, despite several rounds of discussions with numerous investors, the telco couldn’t raise funds.
“The fiber assets, fixed broadband and data centre businesses have an immense growth potential since telecom and internet penetration is rapidly increasing. Pricing will be the key for the PE deals. Within 2-3 months, the deals should get closed,” a source privy to the talks was quoted as saying by the publication.
Vodafone Idea has one large data center in Navi Mumbai and 160,000 km of optical fiber. It also owns fixed broadband provider You Broadband, which it acquired from TRG Capital in 2017 for Rs 400 crore ($54.05 million)
You Broadband, which has over 3,000 km of optical fiber and 6,000 km of last-mile cables, offers services in 21 Indian cities.
According to various reports, the telco had in 2019 tried to sell its fiber assets and data center business, but discussion fizzled out due to valuation differences.
Vodafone Idea chief financial officer Akshaya Moondra last week told analysts that the company is expecting to generate an additional $405 million in cash within this fiscal year from sale of land parcels that were bought for data centers and tax refunds.
The telco recently sought a year of moratorium to clear dues related to recently purchased spectrum due to its bad financial health. It also informed the Indian government that its investors are unwilling to infuse money unless tariffs rise and the health of the industry improves.
The ailing telco, which is a joint venture between the UK’s Vodafone Group and India’s Aditya Birla group’s Idea Cellular, said it is not generating enough money from its daily operations to pay $1.12 billion towards the spectrum payment.
Vodafone Idea also needs to pay the first instalment of $1.22 billion towards previous AGR dues, as mandated by the Supreme Court in March 2022.
The telco’s managing director Ravinder Takkar last week informed analysts that the telco continues to engage with investors and expects to raise funds shortly. However, he added that the telco “doesn’t need a Plan B just yet” and expressed confidence that adjusted gross revenue (AGR) dues will be reduced.
Takkar also said that low tariffs in the country remain the biggest hurdles for the company and for the overall health of the Indian telecom industry. He also expressed Vodafone Idea’s inability to raise tariffs unilaterally.
The third largest telecom operator has 267.8 million customers in the country.