Vodafone Idea shares up 9% on $3.6-bn deal with Nokia, Ericsson, Samsung

Shares of telecom player Vodafone Idea (Vi) surged 9% in the early morning trade following the company inked a $3.6 billion deal with three global network companies. Under the deal, Nokia, Ericsson and Samsung will supply Vodafone Idea the network equipment over three years. This is the largest capex investment by Vodafone Idea so far, which will allow it to upgrade its network.

The company says it is also the first step towards the rollout of its three-year capex plan of $6.6 billion (₹55,000 crore). "The capex programme is directed towards expanding the 4G population coverage from 1.03 billion to 1.2 billion, launching 5G in key markets and capacity expansion in line with data growth. The company has continued with its existing long-term partners Nokia and Ericsson and also onboarded Samsung as a new partner."

Vi shares opened a gap up at ₹11.27 on the NSE today and hit the day's high at ₹11.41, 40% lower than its one-year high of ₹19.18 achieved on June 28, 2024. At 9.34 am, 6,69,02,217 shares were being bought on the counter against the sell quantity of 3,53,29,227, with a total trade volume of 3.1 crore. Today's rally takes the company's m-cap to ₹77,088 crore.

4G and 5G Expansion

Vi says these contracts will allow it to capitalise on the latest "state-of-the-art equipment" to offer better customer experience. It will also enable the company to roll out customised services for 4G and 5G.

The new equipment will lead to energy efficiency gains and lower operating costs. "The supplies against these new long-term awards will start in the coming quarter. The top priority for the company is to expand the 4G coverage to 1.2 billion Indians," says the telco.

According to Vodafone Idea CEO Akshaya Moondra, the company is on its journey of "VIL 2.0". "...from hereon, VIL will stage a smart turnaround to participate in the industry growth opportunities effectively. We look forward to working closely with all our partners as we move into the 5G era.”

Next Capex Plan

Vi says after raising ₹24,000 crore via equity recently and acquiring an additional spectrum of ₹3,500 crore in a June 2024 auction, it has executed some "quick" wins in capex. "These were mainly by way of deployment of more spectrum on existing sites and also the roll-out of some new sites...resulting in 15% boost in capacity and an increase in population coverage by 16 million by end September 2024."

Vi says its capex is currently being funded out of the equity raise. For the long-term capex, it says talks are on with its existing and new lenders to tie up ₹25,000 crore funded and ₹10,000 crore of non-fund-based facilities. "One of the major steps in this process was the completion of a techno-economic evaluation of the company’s long-term projections by an independent third party, which was recently completed. The report has been submitted to all the banks and financial institutions. Basis this report, the banks will now progress with their internal evaluation and approval processes."