Troubled telecom operator Vodafone Idea is reportedly in talks with various private equity investors to raise funding. A consortium backed by US investment firm Oaktree Capital has offered to provide around US$2 billion to Vodafone Idea, according to media reports. Vodafone Idea is also speaking to other potential investors, but nothing has been finalized yet, the reports added.
In September, Vodafone Idea’s board had approved plans to raise up to 250 billion rupees ($3.4 billion) through a combination of equity and debt instruments. In a regulatory filing it had mentioned issuance of non-convertible debentures up to an aggregate amount of 150 billion rupees “by way of public offering or private placement basis or otherwise, in one or more tranches”.
Vodafone Idea was the worst hit when the Supreme Court announced its verdict on adjusted gross revenue computation norms. To comply with the judgment, Vodafone Idea has to pay over 530 billion rupees ($7.45 billion) for its license fee, spectrum usage charge, interest and penalty dues to the telecom department. The top court had widened the scope of adjusted gross revenue to include income from non-core items.
However, this year the Supreme Court eased the repayment pattern by ordering that 10% of the dues should be paid upfront by March 31, while the remaining amount can be paid in 10 equal installments at an interest rate of 8%. Vodafone Idea will have to pay about 70 billion rupees a year in dues to the government.
It is also facing stiff competition from other players – Reliance Jio and Bharti Airtel – and seeing its subscriber base shrink. According to telecom watchdog Telecom Regulatory Authority of India, Vodafone Idea lost over 1.2 million subscribers in August, its tenth straight month of customer desertion. Reliance Jio remains the leading player with a market share of 35.08%, followed by Airtel (28.12%) and Vodafone Idea (26.15%).
However, Vodafone Idea has substantially trimmed its losses from September last year, when it touched 509 billion rupees ($6.86 billion), the biggest in India’s corporate history. In the July-September quarter this year it was 72 billion rupees and in the preceding quarter it was 254 billion rupees.
The average revenue per user in the quarter ended September 30 increased to 119 rupees, up from 114 rupees in the preceding quarter. However, it is low compared with Reliance Jio (145 rupees) and Bharti Airtel (162 rupees).
When Vodafone Plc and Idea Cellular merged in August 2018, it was the market leader with 408 million users. But this July-September quarter it has shrunk to 271.8 million.