Return of bank guarantees opens debt refinancing route for Vodafone Idea: CEO Ravinder Takkar

Vodafone Idea is likely to consider the debt refinancing route to raise funds to alleviate pending dues, according to the commentary by Vodafone Idea MD and CEO, Ravinder Takkar, on the analyst call for Q1 FY23 results. The company, which owes ₹1.98-lakh crore in liabilities to the government and banks, has dues worth ₹6,953 crore payable by June 30, 2023. Takkar was unable to provide fresh updates on fund-raising talks that the company is undertaking with prospective investors, seeking an equity infusion of over ₹10,000 crore.

However, Takkar noted that the return of bank guarantees from the government, will provide the company with additional flexibility to negotiate a further extension of credit from banks.

An analyst attending the call noted, however, that debt refinancing would still not be enough for the company’s massive capital expenditure requirements, especially as the 5G rollout is on the horizon. “It will be a slow bleed,” said the analyst, adding that “the debt refinancing by the company will be enough to ensure that the company is not defaulting on pending dues”. 

Vi has purchased a 5G spectrum worth ₹18,799 crore, purchasing 3.5GHz and 26GHz in priority circles, 17 circles for 3.5GHz and 16 circles of mm-wave. According to Takkar’s comments, the company will be doing a gradual launch of 5G services. He did not disclose the specifics of Voda Idea’s 5G rollout plans, noting that it will depend on a slew of contingencies, including how the ecosystem for 5G use cases evolves over the years, competitive dynamics of the industry in the future, as well as proliferation and penetration of 5G services. Takkar noted that Vodafone Idea had purchased sufficient spectrum for the adequate launch of 5G services in the near term. 

As telecom operators commit to a spectrum buy worth ₹1.5-lakh crore in the 5G auctions, along with an estimated capital expenditure of ₹2-3 lakh crore, Takkar noted that the time is ripe for another round of tariff hikes. With a 23 per cent year-on-year uptick in average revenue per user for Q1 FY23, Takkar noted in the investor call that the effects of the December tariff hikes had gone through. He said Vodafone Idea will not hesitate to lead the charge when it comes to further tariff increases. However, experts noted while another tranche of price increase is necessary, Bharti Airtel will be the likely operator to lead the charge for the same.

Experts note that the government might potentially have to mediate cooperation between the three operators to ensure that another round of much needed price hikes is executed for the industry.  

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