Plans for Vodafone Idea’s fundraising made clear

The board of Vodafone Idea Ltd. on Friday approved the sale of convertible bonds to ATC Telecom Infrastructure in the amount of Rs. 1,600 crores. Given that the tower operator rented out its equipment to Vodafone Idea in order to provide mobile phone services in India, the company would utilise the funds to settle part of its unpaid debts to the latter.

Vodafone Idea owes Indus Towers, the biggest tower provider in the world, and ATC a combined total of over Rs 3,000 crore and Rs 7,000 crore, respectively. According to Vodafone Idea, “The monies obtained will be used for general company operations and to pay obligations payable to ATC under the master leasing agreements.”

The telco announced that it would offer optionally convertible, unsecured, unrated, and unlisted debentures of Rs 16,000 in one or more tranches at a par value of Rs 10 lakh each. The bonds will be convertible into shares at a price of 10 per share and have an 18-month term with a semi-annual coupon payment of 11.2%. Additionally, it claimed that a number of conditions would need to be met in order to sell the debentures at a preferential price, including shareholder agreement and the government converting interest on the deferral of the Company’s spectrum dues and Adjusted Gross Revenue into Equity, would be necessary for the preferential sale of the Debentures.

With debts totalling more than Rs 1.9 trillion and an inability to obtain Rs 20,000 crore through equity or debt from outside investors, the move to pay ATC would give breathing room to the loss-making telecom service provider.

Vodafone Idea, which serves more than 260 million mobile phone users, requires money in order to succeed in the Indian market, where competitors like Bharti Airtel and Reliance Jio have put out aggressive plans for installing 5G services.

During the company’s 27th annual general meeting last month, it was stated that talks were underway with a variety of suppliers for the purchase of 5G (equipment) as well as with banks for financing schemes. He said that the deployment of 5G will start as soon as these two components are in place.