Vi considers share offerings to settle debts with Nokia and Ericsson

Vodafone Idea (Vi) is exploring additional share offerings to its vendors, including Nokia and Ericsson, to settle its outstanding legacy operational debts.

Recently, Vi disclosed plans to raise up to Rs 2,458 crore through a preferential share allocation to Nokia and Ericsson, aimed at clearing a portion of their pending dues. By September 2024, Vi intends to allocate Rs 1,140 crore to Nokia and Rs 703.5 crore to Ericsson, with the remaining Rs 614.5 crore designated for general corporate purposes by December 2024.

“The fundraise from the preferential issue to Nokia and Ericsson will be used to part-pay their dues but further dilution can’t be ruled out. (Since) Vi’s recent capital raise is earmarked for new capex, we wouldn’t rule out further equity swaps and dilution to vendors in the future to clear operational dues,” said analysts at JP Morgan.

Vi, burdened with approximately Rs 20,000 crore in total liabilities (including Rs 13,731 crore in trade payables), plans to allocate the recently raised Rs 24,000 crore in equity capital exclusively towards new investments. These investments are earmarked for enhancing 4G coverage and launching 5G networks. Trade payables, constituting a significant portion, represent Vi’s outstanding obligations to suppliers, including network gear suppliers and tower firms.

Prior to the proposed share issue, Vi owed over Rs 1,200 crore to Ericsson and around Rs 3,000 crore to Nokia. Post-issue, Nokia and Ericsson are expected to hold 1.5 per cent and 0.9 per cent stakes in Vi, respectively.

In contrast, tower vendor Indus faces significant hurdles in recovering around Rs 10,000 crore in overdue payments from Vi, including interest. Vi is prohibited from issuing shares to Indus due to Bharti Airtel’s substantial ownership stake of nearly 48 per cent in the tower company, which would violate Indian telecom regulations.

“Unlike Nokia and Ericsson, Vi will be unable to issue shares to Indus under India’s telecom laws due to Airtel’s ownership in the latter,” JP Morgan added. Business Standard