Vodafone Idea (Vi), a prominent telecom operator in the country, is reportedly considering converting dues towards European vendors into equity. The telco has done this in the past with the Indian government. Now, it may happen with Nokia and Ericsson, two of the largest telecom gear and technology vendors in the globe. Both Nokia and Ericsson haven't been able to get their money from Vi due to the liquidity issues that the telco has been facing.
However, with 4G expansion and 5G rollout in the books, Vi can't sit idle for too long. According to an ET report, Vi is considering converting either a part of the dues or the complete amount into equity for Nokia and Ericsson. But it is not just Ericsson and Nokia, Vi also owes money to Indus Towers - around Rs 10,000 crore.
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The report said that Vi is estimated to owe around Rs 3,000 crore to Nokia and Rs 500 crore to Ericsson. The telco has incurred close to Rs 2 lakh crore in loss over the last five years. This had restricted its ability to raise funds to a certain extent. However, in early 2024, Vodafone Idea managed to secure funding from promoters as well as raise money through a follow-on public offer. Vi raised a total of Rs 20,000 crore through equity and plans to raise another Rs 25,000 crore through debt in the coming years.
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Conversion of debt into equity will dilute the current shareholders further. The report said that Vi is also considering issuing OCDs (optionally convertible debentures) to the vendors as it did to the American Tower Company (ATC).
Vi wants to launch 5G later this year, and for that, it will certainly need Ericsson and Nokia's help. Thus, it will be key to watch what happens here.
