Vodafone Idea, a struggling telecom operator in India, is set to embark on a significant equity fundraising effort to secure more than $2 billion. This move comes as the company faces mounting bills and aims to finance the rollout of its 5G network.
After months of planning, Vodafone Idea’s board has greenlit a follow-on public offering (FPO) scheduled for later this month. The FPO aims to raise up to 180 billion rupees (equivalent to US$2.16 billion) through the sale of new shares.
Investors will have a brief window from April 18 to April 22 to participate in the FPO, with shares priced between INR10 to INR11 each, available in multiples of 1,298 shares. Despite the short timeframe, notable investors like GQG Partners and State Bank of India Mutual Fund are reportedly considering substantial investments, with amounts ranging from $200 million to $500 million, according to Reuters.
The urgency for funds underscores Vodafone Idea’s precarious financial situation. Since its merger in 2018, the company has grappled with debts owed to the government and suppliers, coupled with a declining customer base. Analysts are cautious about the FPO’s impact, noting that while it may provide short-term relief, market share gains seem unlikely.
Vodafone Idea’s struggles are evident in its diminishing market share, currently at 18.9%, down significantly from pre-merger levels. The company’s future hinges on stabilizing customer losses and launching a viable 5G network.
While competitors like Reliance Jio Infocomm and Bharti Airtel have already entered India’s 5G market, Vodafone Idea has lagged behind in making concrete commitments. The FPO is viewed as critical to jumpstarting the company’s 5G efforts.
In a statement earlier this year, Vodafone Idea emphasized that fundraising would support network expansion and improve competitiveness, omitting mention of its pressing financial obligations.
As Vodafone Idea prepares for this crucial share sale, industry observers view it as a make-or-break moment for the company. The outcome of the FPO will likely shape its ability to navigate the fiercely competitive Indian telecom landscape and secure a viable future in the 5G era.
