Tuesday, 11 May 2021

Vodafone Idea seeks $1bn funding from pension funds to stay afloat

by Harry Baldock, Total Telecom
Thursday 22 April 21

The operator has been struggling recently, having lost around 5.7 million customers in December 2020

For some time now, Vodafone Idea has been struggling to survive in the Indian market. Price wars triggered by the disruptive launch of Reliance Jio in 2016, coupled with the billions of dollars it owed to the government as part of its adjusted gross revenue (AGR), meant that by 2020 Vodafone Idea, since rebranded Vi…

For some time now, Vodafone Idea has been struggling to survive in the Indian market. Price wars triggered by the disruptive launch of Reliance Jio in 2016, coupled with the billions of dollars it owed to the government as part of its adjusted gross revenue (AGR), meant that by 2020 Vodafone Idea, since rebranded Vi, was already in significant financial trouble. With few willing to pump more funds in the joint venture, including parent group Vodafone, it seemed for a long time that the company would fall into insolvency. 

But despite these hardships, Vodafone Idea has battled on, attempting to reduce its debt in various ways in the latter half of 2020. Now, however, with India languishing in the second wave of the pandemic, reducing debt could be more important than ever. The company’s main rivals, Bharti Airtel and Reliance Jio, can likely handle the expected slump in subscriber acquisition if a second lockdown were to occur, instead capitalising on higher data revenue and expanding their home broadband user base. For Idea, who already needs to allocate resources to pay off its annual AGR instalments, will struggle to do likewise. The company is already losing subscribers to its major rivals, losing 5.7 million customers in December 2020 alone, according to the Telecom Regulatory Authority of India's (TRAI).

Now, anonymous sources have told the Economic Times that Idea is looking to raise around $1 billion from various pension funds in order to keep its finances in order. According to the report, the funds would be not directly for equity, but rather “debt which is convertible into equity”. 

Pension funds being approached supposedly include Canadian pension funds Caisse de Dépôt et Placement du Québec (CDPQ), Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers’ Pension Plan (OTPP), and Norway’s Government Pension Fund Global. 

Until recently, Idea had announced plans to raise around $333 million via the sale of hybrid securities to foreign funds, but shelved this plan back in March, saying it was prepared to borrow the capital instead. 

With a shrinking subscriber base and potential lockdown on the horizon, it looks like tough times are set to continue for Vodafone Idea.

 

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