Vodafone India gets Rs 47,700 cr from parent to fight Reliance Jio, retire debt, buy spectrum
Vodafone's equity infusion of Rs 47,700 crore is believed to be the largest ever in India
Just a few days ahead of the biggest-ever telecom spectrum auction and a few weeks after Reliance Jio launched its 4G services, Vodafone India on Thursday announced that it has received an equity infusion of Rs 47,700 crore from Vodafone Group in the first half of the current fiscal.
"This equity infusion of Rs 47,700 crore, which we believe is the largest ever in India, will enable Vodafone India to continue its investments in spectrum and expansion of networks across various technology layers delivering the best of experience to our hundreds of million customers," said Sunil Sood, MD and CEO, Vodafone India.
Vodafone India is a 100 percent fully owned subsidiary of the Vodafone Group.
The telecom service provider has around 200 million customers in the country. Over half of its customers (107 million) come from rural India.
The company has around 22.5 percent revenue market share.
"With our commitment to support the Digital India vision, we are building one of the most modern and scalable telecom networks to deliver connectivity and the Vodafone SuperNet experience to all, for both voice and data," Sood said.
Seven telecom service providers, including Bharti Airtel, Vodafone India, Reliance Jio, Idea Cellular, Reliance Communications, Aircel and Tata Teleservices are participating in India's biggest-ever telecom spectrum auction that will start from 1 October.
The total amount of spectrum that will be offered for sale is 2,354.55 MHz. Overall, based on the reserve price, the mop up is expected to be Rs 5.66 lakh crore.
The 2,300-plus MHz of airwaves on the block for telecom operators is in seven bands -- 700 MHz, 800 MHz, 900 MHz, 1,800 MHz, 2,100 MHz, 2,300 MHz and 2,500 MHz -- as against 470.75 MHz in the previous round, which is set to fetch the exchequer $17 billion during its tenure.
The timetable of the auction has put the mock auction dates on September 26 and 27 and the start of actual auction from 1 October.
The government has decided to allot the right to the spectrum won through auction for 20 years.
However, the other factor that has prompted the UK group to pump money into the Indian operations seems to be the launch of 4G operations by Reliance Jio.
The aggressive launch of operations by Reliance has come at a time when the telecos in India were engaged in a heightened fight for market share.
According to this report in The Economic Times, in the first quarter of the current financial year, Bharti Airtel's revenue market share increased by 1.3 percent to 32.7 percent, while Vodafone India saw a marginal rise to 23.3 percent. Idea Cellular, however, saw a decline in its revenue market share to 19.2 percent, the report said citing data from broking firm BNP Paribas.
The telcos are also straddled with debt, which seems to be constrining them from taking on the challenge and cutting the tariffs in line with Jio.
Vodafone's equity infusion has to be seen in this context. The report in the Mint newspaper says the part of the money will be used to retire Vodafone India's debt, which stands at Rs 25,000 crore. This will reduce the burden on the company to a large extent. Some of the money will be to improve the quality of service, says the report.
(Disclosure: Reliance Jio is owned by Reliance Industries, which also owns Network18, the publisher of Firstpost)
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