Vodafone Idea plans Rs28,000-cr war chest to take on Jio
24 January 2019
Vodafone Idea, the merged entity of Vodafone India and Idea Cellular, is creating a Rs28,000-crore war chest to take on arch rival Reliance Jio Infocomm that has made life miserable for all the remaining telecom companies in the country.
Vodafone will invest up to Rs11,000 crore in the fund while the Aditya Birla group will add Rs7,250 crore to the fund that would invest in new technology and cost reduction progammes.
The board of Vodafone Idea Cellular on Wednesday approved a Rs25,000-crore rights issue that will give the country’s largest telecom operator by subscribers more money muscle to take on rival Reliance Jio.
The promoter shareholders will together infuse over Rs18,000 crore in the proposed rights. While Vodafone will invest up to Rs11,000 crore, the Aditya Birla group will put in up to Rs7,250 crore in the joint venture.
Vodafone Idea is also planning to sell its over 11.5 per cent stake in Indus Towers.
In a communication to the bourses, Vodafone Idea said the board had authorised the capital raising committee of the company to decide on the details of the rights issue, including the instrument, issue price, rights entitlement ratio and its timing.
Vodafone holds a 45.1 stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group controls 26 per cent and Idea shareholders own 28.9 per cent.
The mega merger was announced a few months after the entry of Reliance Jio, whose free calls and cheap tariff adversely affected the bottomline of the entire industry.
Vodafone Idea is currently India’s leading telecom service provider with over 422 million customers and revenue market share of 32.2 per cent (Q1 of FY19).
Jio had 280 million subscribers as of December 2018. During the third quarter of this fiscal, the Reliance Industries arm had clocked a net profit of Rs831 crore, which marked an increase of 22 per cent on a sequential basis.
Vodafone India had suffered a loss of Rs4,974 crore in the second quarter of this year.
“The board has considered and approved the offer and issue of fully paid-up and/or partly-paid up equity shares of the company and/or other securities convertible into equity shares of the company, including but not limited to, compulsorily convertible debentures, for an amount aggregating Rs 25,000 crore by way of a rights issue to existing eligible equity shareholders,’’ Vodafone Idea said.
Besides, the promoter shareholders are willing to subscribe to a part or the whole amount of any unsubscribed portion of the rights offer, the company said.
Meanwhile, tower companies Bharti Infratel and Indus Towers have sought exit charges following the Vodafone-Idea merger.
The amalgamation had led to two tenancies on a single tower being converted into one. Vodafone Idea on Wednesday told the bourses in a clarification that negotiations were on in this regard.
Before the merger, both the entities had tenancies on the same tower of infrastructure service providers, including Indus Towers and Bharti Infratel.
“After the merger, these two tenancies on a single tower have been converted to a single tenancy… Both Bharti Infratel and Indus have raised demands for exit charges on the company on account of this change and for which the company is in negotiations with them,” the company said in the filing.