Fairness conversion to assist Vodafone Thought in increasing 4G, rolling out 5G: Analysts, ETCFO
NEW DELHI: The Central authorities’s determination to transform Vodafone Thought’s (Vi) Rs 36,950 crore spectrum dues into fairness will assist the telco in increasing 4G protection, and rolling out fifth-generation (5G) cellular networks to arrest subscriber churn to rival carriers, analysts stated.
“The federal government of India’s determination is a cloth constructive for VIL, in our view, because it eases considerations on VIL managing repayments in FY26 and in addition improves the outlook for a debt increase. Our calculations point out VIL might want to safe debt funding of ~INR400bn (Rs 40,000 crore) over FY26-27F to handle its dues and capex plans,” Nomura stated in a analysis observe Tuesday, seen by ETTelecom.
The telco has been in discussions with lenders to shut a debt funding of Rs 25,000 crore, however has not been profitable to date. “We imagine the finalising of the fairness conversion will doubtless allow a sooner turnaround on securing incremental capital,” the Japanese brokerage stated.
Up to now, Vi has raised roughly Rs 26,000 crore by way of the fairness route.
As per Nomura, Vi was liable to pay Rs 61,000 crore in spectrum dues between FY26 and FY28. Nonetheless, following the Central authorities’s determination, the dues have decreased to almost Rs 20,000 crore over the identical interval.
Vi stated in a regulatory submitting late Sunday that it has been directed by the federal government to difficulty 36.95 billion fairness shares of the face worth of Rs 10 every at a problem value on a par, inside 30 days after issuance of orders from the Securities and Alternate Board of India (Sebi) and different authorities.
Consequently, the federal government of India’s shareholding in Vi will enhance from 22.6% presently to almost 49%, whereas current promoters – Vodafone and the Aditya Birla Group – will proceed to have operational management of the telco regardless of their mixed stake declining from the present 38.8% to 25.57%.
Nomura estimates Vi’s common income per consumer (ARPU) will rise to Rs 200 in FY27, versus an ARPU of Rs 173 within the third quarter of fiscal yr 2025.
“We count on the tempo of subscriber loss to average in FY26F and VIL to return to modest subscriber progress in FY27F,” it stated, including that whereas the outlook for Vi has improved, its future stays hinged on closing the debt increase quickly which can be important for the telecom provider to have the ability to put money into networks and return to a modest subscriber progress path.
Jefferies stated the federal government determination will present some cashflow aid to Vi, which in flip, might assist the telco’s community funding and cut back market share shifts to Jio and Airtel. “Provided that VIL’s debt scenario and cashflow mismatch will stay at uncomfortable ranges post-conversion, additional interventions can be required,” it stated.
The federal government’s giant fairness holding (49% stake) and debt holding (over 2.5x Vi’s market capitalisation publish conversion), is more likely to align its pursuits with that of Vi, which ought to enhance the tariff hike outlook and will result in additional regulatory aid for the sector, leading to a internet constructive for each Jio and Airtel, the American brokerage stated.
IIFL Capital, in the meantime, stated that the continued authorities assist might maintain Vi afloat within the medium-term, albeit as a distant third-ranked participant. “That stated, continued dilution in Vi’s shareholding would cap upsides for current shareholders. If the federal government have been to hypothetically convert all dues owed by Vi, its shareholding in Vi can be ~81%,” IIFL stated.
“We see this fairness dilution as a bandage,” analysts at Macquarie stated. “With the underlying FCF era insufficient to organically pay again obligations per timelines, we reiterate important extra fairness dilution dangers for minority shareholders,” they added.
Ambit Telecom individually stated Vi stays in a precarious place with a internet debt of Rs 1.72 lakh crore, together with an adjusted gross income (AGR) dues of Rs 75,000 crore, in opposition to an annualised Q3FY25 money EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortisation) of Rs 980 crore.
“Vi wants tariff hikes essentially the most because it must reinvest in 4G inhabitants protection and roll out 5G providers to retain its customers…We count on a 15% tariff hike in Dec-25, adopted by annual tariff hikes in 2026-33, enabling 10% tariff CAGR,” Ambit Capital stated in a analysis observe, seen by ETTelecom.
The telco’s capex ought to assist it stabilise consumer decline within the second half of fiscal yr 2026. “We imagine that the federal government’s intention isn’t to take management of Vi and, therefore, its determination to cease at 49%,” the brokerage stated.
Vi has deliberate a three-year capex of Rs 50,000 crore to Rs 55,000 crore to put money into 4G and 5G enlargement in its 17 precedence circles to compete successfully in opposition to rivals Reliance Jio and Bharti Airtel, and cut back subscriber churn.
“Faster rollout of 4G/5G websites ought to assist Vi stabilize their subscriber churn, which is crucial for survival. VI’s spectrum bands are just like Airtel, that are extensively rolled out on Indus’ tower. This makes Indus the largest beneficiary of dues conversion,” stated Ambit Capital.
