Vi gets shareholders' nod for ₹2,458 cr preferential issue to Nokia, Ericsson

Cash-strapped Vodafone Idea (Vi) has informed exchanges that it has received shareholders’ nod to issue preferential shares to Nokia and Ericsson worth ₹2,458 crore. Besides, shareholders have also given nod for conversion of ₹160 crore worth optionally converted debentures issued to ATC Telecom. These moves are expected to enable the telecom operator to address its vendor dues and improve its 5G and 4G network rollout.

The company informed through a regulatory filing on July 11 that the shareholders had voted in favour of the preferential issue of shares to the two vendors at the Extraordinary General Meeting on July 10, 2024. This preferential issue will give Finnish Nokia and Swedish Ericsson 1.5% and 0.9% stakes in VIL, respectively.

VIL holds a long-term partnership with Nokia and Ericsson for key supplies of its network equipment, and the preferential share allotment will partially clear the former’s outstanding dues.

Of the total ₹2458 crore worth preferential shares, Nokia Solutions will avail a total of 102.7 crore equity shares worth ₹1,520 crore and Ericsson India will avail 63.37 crore equity shares worth ₹938 crore, with per equity share being priced at ₹14.8.

“As VIL embarks on its growth journey, support from key stakeholders is critical and the agreement with Nokia and Ericsson reaffirms these vendors as long-term partners of the company and sets the stage for the next phase of our growth,” said Akshaya Moondra, CEO of Vodafone Idea Limited in the press release dated June 13, 2024.

With this allotment, the company informed in an earlier release that the promoter (ABG and Vodafone) shareholding will stand at 37.3% with a 23.2% shareholding of the Indian government, while the balance 37.1% will be public shareholding.

Last month, the company had said that its recent steps including the preferential share allotment, the March conversion of 1440 OCDs, and the FPO issue which concluded in April this year had helped the company raise around ₹24,000 crore of equity, with most funds coming from the follow-on public offering. Amid an increase in interest and financing costs, the company reported ₹7,675 crore losses in the March quarter of the last fiscal.

The company in August had informed about the allotment of 16,000 optionally convertible debentures aggregating to ₹1,600 crore to ATC Telecom Infrastructure Private Limited following which in another communication dated March 23, 2024, the company informed about the conversion of 14,400 of these OCDs into equity shares of the face value of ₹10 each.

With an urgent need to manage a heavy debt load, the third-placed Vodafone Idea is restrictive in making any investments in network quality. This creates a circular problem given the firm’s operations cash flow is inadequate for network enhancements to retain subscribers and, this in turn, leads to the loss of subscribers.

The Company as of March 31, 2024, has a subscriber base of 212.6 million assuming the third position in market share after Reliance Jio and Bharti Airtel which now have a more competitive spectrum profile after the recent telecom auction.

S&P Global, a capital market company in a report released yesterday estimated that as of March 31, 2024, VIL's debt to EBITDA ratio stood at about 15x, with adjusted debt of about ₹2.5 trillion.