On Friday, Vodafone Idea (Vi) said that it had been directed by the Ministry of Communications to convert its interest dues on the deferred AGR and spectrum-related payments into equity for the government. The telco wanted this to happen for a long time. However, on multiple occasions, Vi said that due to the delay being caused in the conversion of dues into equity for the govt, it couldn't go ahead with the fundraising activities. The telco implied that because the government is not taking its stake, the outside investors don't have an idea of what to expect and thus aren't willing to give funds. But now that it has happened, it is time for Vi to show the investors and the market that it can raise funds.
The telco is in dire need of fundraising to expand 4G networks and place commercial orders for 5G equipment. Vi participated in the 5G spectrum auctions of 2022 and bid for airwaves in the mid-band and mmWave bands. Without improving the networks and rolling out 5G, Vi would be very much behind its competitors, and that wouldn't sit well with the future of the company.
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In the short term, Vi has to clear the dues of Indus Towers. The telco has been warned by the tower company to pay the dues or lose access to the towers. A successful fundraiser should help the telco in taking care of that. One worry that the lenders and investors who want to give money to Vi have is that the telco would use the funds to clear existing dues/debt.
What Did the ABG Promise Govt?
If the telco cannot raise funds now, it would be terrible for the business in the short term. But, according to the union telecom minister Ashwini Vaishnaw, the Aditya Birla Group (ABG), one of the promoters of the telco, has promised to bring investments into the telco. This is the promise made by the promoter to the government, after which the government decided to go ahead with the equity conversion.
Read More - Vodafone Idea Gets Green Flag to Convert Interest Dues to Equity for Govt
Now it is time for Vodafone Idea to walk the talk and bring in investments. The telco's stock has suffered a lot in the last few weeks. Vi needs to arrest the subscriber churn and start working on the 5G rollout plans. The telco is also expected to go the Airtel way and launch 5G NSA (non-standalone) networks for consumers.
Things have not become all good for Vi just because the government agreed to the equity conversion. The telco has several challenges to address so that it can build a strong foundation going forward.
