Vodafone Idea soars nearly 5% on fund infusion from Indus Towers stake sale

Vodafone Idea soars nearly 5% on fund infusion from Indus Towers stake sale
Vodafone Idea sells stake in Indus TowersBCCL
  • Vodafone-Idea’s shares are up 5% after the company completed its stake sale in Indus Towers for ₹3,760 crore.
  • There are also reports that a consortium led by Oaktree Capital has offered around $2 billion of capital to invest in the Vodafone Group’s Indian arm.
  • Analysts believe that fresh investments and price hikes to improve average return per users (ARPU) are the only things that can help its survival.
Vodafone-Idea has been bleeding subscribers for years and now even its postpaid customers are under threat of being wooed away by Reliance Jio. According to analysts, the only way out for the company is with the fresh infusion of funds — and that’s what the company is doing.

Vodafone-Idea shares were up nearly 5% today morning after the telecom player completed the sale of its stake in Indus Towers for ₹3,760.1 crore in cash. There are also reports that a consortium backed by Oaktree Capital has offered Vodafone’s Indian arm $2 billion — approximately ₹14,800 crore — in funding.

Vodafone Idea soars nearly 5% on fund infusion from Indus Towers stake sale
Vodafone-Idea share price since September 7 when it was rebranded as Vi!BSE/BI India

Both of these moves tie in with Vodafone Idea’s announcement in September where it revealed its plans to raise ₹25,000 crore by selling its shares and debt.

New funds and price hikes are the only way to save Vodafone-Idea

As Vodafone Idea continues to lose subscribers, it's also running out of money. This limits the company’s ability to invest in networks and adds to subscribers’ woes who switch over to other telecom operators.

“We believe this spiral can be broken only with significant ARPU increase and fund infusion,” said Edelweiss Research in its report dated October 30. According to Axis Capital, Vodafone Idea’s future depends on it.

The new mega tower company
In the endeavour to raise new funds, Vodafone Idea has sold off around 11.15% of its holding in Indus Towers to make way for a newly merged mega tower company.

The Vodafone Group will still hold around 28.12% in the new firm. Meanwhile, Bharti Airtel’s stake reduces from 53.51% in Bharti Infratel to 36.7% in the combined entity.

"Merger of Indus Towers Limited & Bharti Infratel Limited has been completed today. The combined entity, to be renamed as Indus Towers Limited, is listed on the National Stock Exchange of India Limited & BSE Limited," said Bharti Airtel in its filing with the Indian exchanges.

Oaktree, Varde Partners and others offer $2 billion in funding
The Oaktree-led consortium is formed of many companies, including Varde Partners. Sources told Bloomberg that they have made an offer to infuse between $2 billion to $2.5 billion of capital into Vodafone Idea.

But, this is only one of the many offers that the company is currently considering. Vodafone Idea is in talks with several other investors.

The company has been reporting losses for nine consecutive quarters. And, since the merger of 2017, Vodafone Idea is yet to come up green in its annual reports.

Vodafone Idea is the weakest of three telecom giants in India, the other two being Bharti Airtel and Reliance Jio. And its survival is the only thing that’s standing in the way of the Indian telecom market turning into a duopoly.

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