The chances of Vodafone Idea’s exit in the medium term is quite high. Especially if the telco can’t pay its dues by raising capital from the market. There’s a positive thing for Vodafone Idea in the market though. It is the expected tariff hikes and the relief package from the government. Vi has been struggling to make ends meet and because of the large amount of dues, the company won’t even be able to invest on its networks for expanding coverage and increasing capacity further. This is why Bharti Airtel’s current capital raising activity can be even more of a strategic thing than how it appears to the general market.
Kotak Believes Airtel Capital Raise a Move Towards Future-Proofing Network for Vi Users
Bharti Airtel might be future-proofing its network for Vodafone Idea (Vi) users that might migrate to its network in the future. Jefferies has already noted that Vi users are shifting to Jio and Airtel’s 4G networks.
Since the future of Vi is weak, Kotak believes that Airtel might be raising some part of that cash to future proof its network for Vi users that might come to its network. This is a fair assessment since Bharti Airtel already has enough cash in hand to sustain and even invest some of it in its networks. But the telco is raising capital through a rights issue in a much larger scale so that it can have the comfort of extra cash in the bank for not only investing in the network capacity but also so that it can prepare for 5G.
Sunil Bharti Mittal, Chairperson of Bharti Enterprises, recently said that it is better for the telco to raise cash when it is possible than to raise it when there’s no one willing to give it. This is the situation that Vodafone Idea is currently in. Vi’s board had approved for a fundraising plan last year, but that hasn’t happened until now because there’s no one who wants to lend the telco their money.
