Vodafone Idea will hold a board meeting on September 4 to consider raising fresh funds. This comes after the Supreme Court allowed the operator to pay its AGR dues over a 10-year period. The operator will need fresh funds to not only meet its payment obligation but also to invest in network expansion.

In a stock exchange filing, Vodafone Idea said it plans to raise funds and will consider all options, in one or more tranches, by way of a public issue, preferential allotment, private placement, including a qualified institutional placement, or through any other permissible mode and/or combination. It will consider an issue of equity shares or any instruments or securities including securities convertible into equity shares, GDRs, ADRs or bonds including foreign currency convertible bonds, convertible debentures, warrants, and/or non-convertible debentures including non-convertible debentures along with warrants, which may or may not be listed.

Vodafone Idea has to pay ₹53,000 crore to the Centre, which means it will have to fork out ₹5,000 crore a year just to pay past AGR dues. In addition, the operator will have to fund its current payments towards licence fees and spectrum usage charges besides capital expenditure towards network rollout.

Multiple headwinds

There are multiple headwinds facing the operator. Vodafone Idea is still playing catch-up with Reliance Jio and Bharti Airtel when it comes to 4G network roll-out. Even if the ₹53,000-crore AGR dues have to be paid over 10 years, the operator’s balance sheet will be too highly leveraged to make fresh investments into network rollout or acquiring fresh spectrum.

It is expected that the Centre will hold a 5G spectrum auction sometime next year and, going by the existing reserve price for the airwaves, Vodafone Idea may find it difficult to participate in the bidding process in view of the already large debt on its books.

In this scenario, the operator has to raise fresh funds to stay competitive.