Vodafone Idea Limited (VIL), an Indian telecom operator, has started fresh conversations with the banks. These conversations are focused on being able to secure letter of credits (LCs). These LCs will help the telco in getting more equipment from the vendors. Vi is in the processing of scaling up its capex (capital expenditure) to aggressively roll out 4G and 5G throughout India. However, the company needs to get equipment/gear from companies like Nokia and Ericsson for that. Vi already owes money to these vendors, and thus, they would likely not be willing to expose themselves further as Vi's business is still not showing any major improvements.
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If the vendors accept the Vi's strategy of submitting LC to procure equipment, it would help the telco majorly in freeing up its cashflow. The cashflow can be used to pay off dues fast and the telco can keep scaling network at the same time. Vi has launched 5G in one circle so far - Mumbai. Very soon, the company will launch it in four more circles.
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Vi's strategy is to use the LCs, backed by government's debt conversion in dues for getting access to the eqipment fast without making full payments. Since the government has now agreed for conversion of debt to equity in the telco, the banks may issue LCs without much resistance. According to an ET report, it is still yet to be seen whether the vendors will accept the LCs from Vi. The telco already owes money to the vendors, and thus the vendors may be wary of exposing themselves further to the telco.
After the debt conversion, the government will own 48.99% of stake in Vodafone Idea. This will help Vi in reducing debt and get some relief on cashflow.
