Troubles for Vodafone Idea (Vi) wont end if the telco cant soon raise money to invest in its networks and arrest subscriber loss. The telco might soon raise between $750 million (Rs 5,550 crore) to $1 billion (Rs 7400 crore) via overseas convertible bonds options. According to ET Telecom, this money would be used to pay off vendors, fund capex plans, and also meet loan repayment obligations. The telco might go ahead with this early in February.
Vodafone Idea had recently raised Rs 5000 crore as a short-term loan from the banks. This money is supposed to be used for clearing the upcoming payments to the non-convertible debenture (NCD) holders. Vi reportedly had to pay Rs 4500 crore by February 2022 to the NCD holders. Since it is a short-term loan, the company will pay it back to the banks within one year.Vodafone Idea had recently announced that it would accept the conversion of debt into equity for the government.
While the telco had to hand away an equity stake of 35.8% to the government, its debt and liabilities have reduced significantly. This will also help with improving the credit ratio of the company as the government debt is gone.However, theres still a significant amount of debt that the company has to clear in the coming years. The telco needs significant funds to fuel capex plans and also arrest subscriber churn rate. At the speed Vodafone Idea is losing prepaid subscribers every quarter, in a few years, the telco might not have a business to hold equity in for the government.Without additional capital, Vodafone Idea wont be able to expand its network and also invest in 5G spectrum.
Post 5G spectrum auctions, the industry debt will again rise as the telcos will have to shell out thousands of crores to acquire necessary airwaves to deliver 5G services at full capacity.