In Short:
Vodafone Idea, facing financial struggles, has partnered with Samsung, Nokia, and Ericsson to upgrade its 4G network and prepare for 5G services in a $3.6 billion deal over three years. This investment aims to expand 4G coverage and improve customer experience. The company has raised funds and is working on a larger $6.6 billion plan to enhance network infrastructure and performance.
Vodafone Idea, currently facing financial challenges, has secured equipment procurement agreements with Samsung, Nokia, and Ericsson to overhaul its fourth-generation (4G) mobile network and prepare for the deployment of fifth-generation (5G) services in selected markets. This initiative involves a substantial investment amounting to $3.6 billion over a three-year term.
Investment Details
The recent agreement is a critical component of Vodafone Idea’s ambitious three-year capital expenditure (capex) plan totaling $6.6 billion (approximately ₹550 billion). The objective of this plan is to expand 4G coverage from 1.03 billion to 1.2 billion, introduce 5G services in strategic areas, and enhance capacity to meet growing data demands, as highlighted by the company in a statement released on Sunday.
Continued Collaborations
Vodafone Idea will maintain its collaboration with longstanding partners Nokia and Ericsson, while also integrating Samsung as a new associate. In February, the company was nearing the commercial phase of a trial concerning Open Radio Access Network (Open RAN) with Mavenir, though the latest announcement does not reference any agreements with this vendor.
Competitive Landscape
In the competitive landscape, major telecom operators in India, including Reliance Jio and Bharti Airtel, have previously engaged in multi-year, multi-billion dollar contracts for 5G equipment with Nokia and Ericsson, while also collaborating with Samsung and Cisco.
Operational Efficiency
The new agreements will facilitate Vodafone Idea in leveraging cutting-edge equipment, thereby enhancing customer experiences. According to the company, the equipment provided by the three vendors is expected to yield improvements in energy efficiency and lower operational costs.
Implementation Timeline
Supply under these long-term contracts is anticipated to commence in the upcoming quarter. Akshaya Moondra, CEO of Vodafone Idea, emphasized the company’s commitment to investing in emerging network technologies to ensure a superior experience for customers, stating, “We have kickstarted the investment cycle.” Moondra further elaborated on the company’s strategic evolution towards effectively seizing growth opportunities within the industry.
Future Prospects
Highlighting the long-standing partnership with Nokia and Ericsson, Moondra expressed enthusiasm about the collaboration with Samsung as they transition into the 5G era. Following a recent equity raise of ₹24,000 crore and additional spectrum acquisition valued at ₹35,000 crore during the June 2024 auction, the company has initiated several immediate capital expenditure projects.
The immediate initiatives included deploying additional spectrum on existing sites and establishing new sites, resulting in an approximate 15% boost in capacity and expanding population coverage by 16 million by the end of September 2024. Vodafone Idea observed an enhancement in customer experience in regions where the rollouts have been completed.
Funding Strategy
Currently, the capex is being funded through the recent equity raise. For the long-term capital expenditures, discussions are in advanced stages with existing and new lenders to secure ₹250 billion in funded and ₹100 billion in non-fund-based facilities.
Independent Evaluation
A significant step forward involved completing a techno-economic evaluation of the company’s long-term projections by an independent third party, which has been submitted to various banks and financial institutions. This report will now guide the banks through their internal review processes.
