Vodafone Idea (Vi) promoters, including the Aditya Birla Group (ABG) and the Vodafone Group Plc of the United Kingdom (UK), were expected to infuse capital into the company. However, months have gone by, and not a single promoter has infused any capital in the telco. On top of that, Vi has not been able to secure investment from any outside investor yet, and it is not a good sign for the upcoming 5G spectrum auctions.
During the spectrum auctions, the telecom operators will require thousands of crores for upfront payment to the Department of Telecommunications (DoT). Thus, Vi not performing financially well for the last few years coupled with no outside capital means the telco either has to increase its debt further or not participate in 5G spectrum auctions in full capacity.
A few months are still left for the spectrum auctions, so Vi would be sitting fingers crossed about getting an investor or multiple investors onboard. It’s not just about the spectrum auctions, though. Vi won’t be able to increase its capex levels to where Airtel and Jio are at if it doesn't secure any investment. This will result in poor 4G coverage in comparison to the competitors, which will ultimately add to the subscriber churn rate, especially after tariff hikes.
Not to forget that the Indian government will be the largest promoter in the company once the shares are allotted post the confirmation from the Department of Telecommunications (DoT).
Vodafone Idea Waiting to Get an Investment While Airtel Got Plenty
Vodafone Idea has been on the lookout to raise capital for years now, but the telco has found no success to that end. On the other side, Bharti Airtel is raising capital again and again. Airtel raised Rs 21,000 crore via a rights issue in October 2021; then, in January 2022, the telco got a $1 billion investment from Google, and now, Airtel’s board has approved for raising more funds via debt instruments.
It is honestly sad to see Vodafone Idea struggling because of not sufficient cash. The telco has the potential of acquiring customers from Airtel and Jio; however, it can’t raise the capex levels because it has no money. Even after so much help from the government, the promoters haven’t shown any initiative.
Note that before the relief measures for the telecom sector was announced, Kumar Mangalam Birla, Chairman of the Aditya Birla Group, had offered to sell his stake in Vodafone Idea to the government. No one should blame Mr Birla for being a businessman. Almost any sane business-minded person would have sold his/her stake in Vi before the relief measures were announced.
However, after all the help that the telco has received in the last few months coupled with the prepaid tariff hikes, it is strange to see why none of the promoters is showing any belief in the company. Until the time Vi promoters don’t make a move, the outside investors won’t show any confidence either.