Govt endorses Vodafone Idea’s capital raise initiative

The government will support Vodafone Idea’s plan to raise Rs 45,000 crore in equity and debt, including capital from its promoters, Union IT and Communications Minister Ashwini Vaishnaw said. He added that the government has taken all possible measures to support the ailing telco thus far.

“We would like to support every fundraising programme that Vodafone Idea wants to take up. Since it’s a listed company, I don’t want to comment on its future. What’s important is that from the government perspective, we have done everything possible to do,” Vaishnaw said.

Vi has secured equity commitments from anchor investors exceeding $1 billion (Rs 8200 crore), Moneycontrol recently reported. The loss-making telco on March 5 invited its shareholders to participate in the extraordinary general meeting (EGM) on April 2 to approve the company’s Rs 20,000 crore equity fund-raising plan.

After obtaining the necessary approvals, the telecom operator expects to conclude the equity fundraising in the upcoming quarter. The company’s promoters will also participate in this round.

During its earnings call on January 30, Vodafone Idea outlined plans to roll out 5G services within six to seven months after procuring the necessary funding. The telco has successfully fulfilled its 5G minimum roll-out obligations in four key circles of Delhi, Chennai, Pune, and Punjab and has told the telecom department to meet requirements in four to six more circles in the coming months.

Vaishnaw reiterated that telecom operators will respond subduedly to the upcoming spectrum auction, as demand is expected to be restricted to spectrum that will be up for renewal in some circles.

India’s next spectrum auction is set to begin on May 20, according to the notice inviting applications (NIA) document released by the Department of Telecommunications on March 8.

“We will see demand for renewals, basically from companies that want to renew their spectrum and also some demand from people who want to fill in some of the gaps they had in the spectrum,” he said.

The government will also auction spectrum held by certain companies undergoing insolvency proceedings and those expiring in 2024 on completion of the term. “Some of the spectrum tied up in the NCLT with companies and that are expired will also become available.”

The minister said that more spectrum availability will enable telecom operators to offer better quality of service. All the available spectrum in 800, 900, 1,800, 2,100, 2,300, 2,500, 3,300 MHz, and 26 GHz bands will be put to auction at a base price of Rs 96,317.65 crore. The reserve prices for various bands have been revised using suitable indexation, per TRAI recommendations.

As per the NIA document released on March 8, spectrum winners must settle the payment within ten days of receiving the demand note, either in whole or partially, with the option for 20-year installment plans at 8.65 percent interest. Moreover, a moratorium is available based on upfront payment, followed by installment payments.

The auctioned spectrum, awarded for a 20-year term, will not incur any spectrum usage charges (SUC). After this period, carriers must repurchase it from the government.

As per the NIA document, the spectrum acquired can be shared, traded, and leased among telecom service providers after one year from the frequency assignment date, with surrender options available.

In the last spectrum auction held in 2022, the government offered 72,097.85 MHz of spectrum with a 20-year validity period. Reliance Jio spent Rs 88,078 crore on 5G spectrum, followed by Bharti Airtel at Rs 43,084 crore and Vodafone Idea at Rs 18,799 crore. Moneycontrol