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Vodafone Idea confident of operational creditors’ support amidst payment delays

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In Short:

Vodafone Idea is confident that its operational creditors like Nokia and Ericsson will continue to support them despite delays in payments. Vi’s upcoming 4G and 5G rollout will generate fresh business for vendors. Vi plans to invest Rs 55,000 crore in the next three years for network expansion. Vi recently raised funds to clear pending dues to Nokia and Ericsson. Indus may face challenges in recovering past dues from Vi.

Vodafone Idea (Vi) Confident in Operational Creditors Support

Vodafone Idea (Vi) is confident that its operational creditors, including network gear makers Nokia and Ericsson and tower vendor Indus will continue to support it despite delays in clearing their dues. The telco’s upcoming 4G-cum-5G blitz is expected to generate fresh business for them.

Vendor Support Amid Payment Issues

Vi’s CFO Murthy GVAS mentioned in a meeting with global brokerage J P Morgan that vendor negotiations shouldn’t be impacted by payment issues. The post-5G capex peak of equipment vendors could see Vi as a primary source of growth, ensuring their support. Recent preference shares issued for part dues also point towards continued vendor support.

J P Morgan also quoted Vi’s Murthy saying that Vi offers a profitable second tenancy and loading revenues to Indus, keeping the terms of trade in the telco’s favor.

Vi’s Capex Plans Benefit Vendors

Over the next three years, Vi plans to invest Rs 55,000 crore in expanding its 4G coverage and rolling out 5G networks in priority markets. This planned investment is expected to bring fresh business for network and tower vendors, especially with competitors like Reliance Jio and Bharti Airtel completing their nationwide 5G rollouts.

Preferential Share Issue to Clear Dues

Vi recently announced plans to raise up to Rs 2,458 crore via a preferential share issue to clear pending dues to Nokia and Ericsson. Prior to the share issue, Vi owed over Rs 1,200 crore to Ericsson and around Rs 3,000 crore to Nokia. After the share issue, Nokia and Ericsson will hold around 1.5% and 0.9% stake in Vi, respectively.

Challenges with Indus Dues

Analysts anticipate challenges for Indus in recovering around Rs 10,000 crore of old dues from Vi, including interest. Vi cannot issue shares to Indus against such dues due to regulatory restrictions. Bharti Airtel’s substantial stake in Indus prevents Vi from issuing equity to Indus without violating telecom laws.

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