Vodafone Idea gets board nod for rights issue
NEWDELHI: The board of Vodafone Idea Ltd, India’s largest telecom operator by subscriber base, approved a rights issue of ₹25,000 crore for existing shareholders in line with the recommendations of a capital raising committee it had set up in November, the company said on Wednesday.
It is critical for the company to raise resources to compete in a telecom market disrupted by the entry of Reliance Jio in September 2016 that brought down tariffs and hit revenue streams of operators. Moreover, Vodafone Idea, which posted a loss of ₹4,970 crore in the September quarter, needs resources to meet its spectrum liabilities to the government and expand its 4G network coverage from the existing 50%.
“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 up to ₹25,000 crore, by way of a rights issue to existing eligible equity shareholders of the company,” Vodafone Idea said in stock exchange filing.
The board had authorized the capital raising committee to decide on the terms and conditions of the rights issue, including the instrument, issue price, rights entitlement ratio, record date and timing of the issue, besides others.
“The company’s promoters Vodafone Group and Aditya Birla Group have reiterated to the board that they intend to contribute up to ₹11,000 crore and up to ₹7,250 crore, respectively, as part of such a rights issue,” the company said.
The promoter shareholders have also said that in case the rights issue is under-subscribed, each promoter shareholder reserves the right to subscribe to a part or the entire amount of the unsubscribed portion.
Following the entry of Reliance Jio, the consolidation in the telecom sector has ended, with only two private entities—Bharti Airtel and the merged entity of Vodafone India and Idea Cellular—pitted against the Mukesh Ambani-owned telco.
To provide more balance sheet flexibility, Vodafone Idea is also exploring a sale of the company’s fibre network, comprising more than 156,000 km of intra- and inter-city fibre routes, it had said in November.
In November, Vodafone Idea chairman Kumar Mangalam Birla had met officials from the finance ministry and department of telecommunications to discuss the firm’s pending spectrum-related liabilities worth ₹3,000 crore, due in March 2019. It has an additional ₹12,000 crore due in the middle of the next financial year, Credit Suisse had said in a note dated November 22, 2018.