Vi to use funds from capital raise to boost 4G coverage to stem user losses

(Vi) will deploy cash from its upcoming Rs 25,000 crore fundraise to boost 4G coverage in its 16 priority circles to effectively combat Reliance Jio and and rein in customer losses.

Vi’s top management, at a quarterly earnings call, said the upcoming “fund raise capital would be used to increase coverage in the 16 priority circles, which contribute to 94% of the telco’s revenues,” BofA Securities, which participated in the call, said in a note seen by ET.

JM Financial, which was also present on the call, said Vi’s leadership added that the telco’s earlier “planned monetisation of its fibre and data-centre assets is in the backburner for now”.

Vi has said its planned fund-raise will “close soon amid clear interest” from global investors. ET has reported a consortium led by Oak Hill Advisors is in advanced talks to offer a $2-billion credit line as part of the overall funding plan.

J M Financial said “Vi is confident of having enough capacity to meet increased usage with its current capex levels, but a fund raise is necessary to ensure adequate capex in the medium term,” failing which, customer experience could suffer and accelerate churn of high-quality customers.

Vi’s quarterly capex at Rs 970 crore in the December quarter was less than four times Airtel’s Rs 4,200 crore in its India wireless services business.

The telco reported a narrower net loss for the quarter, while its key parameters such as average revenue per user, minutes of use and subscriber base continued to trail rivals Bharti Airtel and Reliance Jio. Its shares closed 2.3% lower at Rs11.80 on the BSE Tuesday.

Some industry executives say Vi’s decision to drop the planned monetisation of its fibre and data-centre assets could be triggered by the recent closure of the Bharti Infratel-Indus Towers merger. Last month, Vi received Rs 3,760.1 crore in cash by selling its 11.15% stake in Indus to the combined entity created after the completion of the merger of the tower company with

Back in November 2019, Vi’s managing director Ravinder Takkar had said the telco was exploring ways to monetise its data centre assets and 1,60,000 kms of intra/inter-city fibre to gain financial flexibility amid the then delays in the closure of the mega towers merger.

Analysts expect telecom sector revenue growth to stay strong led by a combination of an imminent Vi-led tariff hike and more customers going 4G. They, though, expect sector consolidation to continue with both Airtel and Jio continuing to gain share till Vi is able to complete its fundraise and ramp up its network investments.

BNP Paribas said that while “around 69% of industry subscribers use 4G services, there are still over 300 million consumers who are yet to adopt 4G, signifying an opportunity for the industry”.

The combined India mobile revenues of the Big 3 telcos rose 5% on-quarter and 22% on-year in the October-December period, propelled by strong growth on this score by Airtel and Jio even as cash-strapped Vi suffered an on-year decline, shackled by low network capex spends, analysts said.

CLSA said the combined India mobile revenues of the Top 3 telcos “increased 22% on-year to Rs 44,200 crore in the December quarter” as both Airtel and Jio continued to gain market share with 32% on-year revenue growth each while Vi’s revenue declined 1.8% on-year. Business Journal