Vodafone Idea may issue more shares to pay dues to the vendor

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To clear its remaining operational dues, Vodafone Idea (Vi) may offer more shares to its sellers in the coming days. These two European network vendors include Finland’s Nokia and Sweden’s Ericsson. Earlier this week, Vi announced plans to raise up to ₹2,458 crore by issuing preferential shares to Nokia and Ericsson to pay off part of their dues.

Of this, the company plans to pay ₹1,140 crore to Nokia and ₹703.5 crore to Ericsson by the end of September 2024, while the remaining ₹614.5 crore will be utilized by the end of December 2024.

Total liabilities of about ₹20,000 crore on Vi

JP Morgan said in a note that Vi has total liabilities of around ₹20,000 crore (including trade payables of ₹13,731 crore) and the recently raised equity capital of ₹24,000 crore will be used exclusively to expand 4G coverage and fund new capital expenditure. It is proposed to To roll out 5G networks.

Trade payables typically represent the balance of Vi owed to vendors such as network gear suppliers and tower firms. Before the proposed preference share issue, Vi owed about ₹1,200 crore to Ericsson and about ₹3,000 crore to Nokia, people with knowledge of the matter said.

Recovery will face major challenges

After the share issue, Nokia and Ericsson will hold 1.5% and 0.9% respectively in Vi. Analysts expect tower vendor Indus to face major challenges in recovering the overdue amount of around ₹10,000 crore (including interest) from Vi.

Vi cannot issue Indus shares in lieu of past dues. This is because rival telecom Bharti Airtel owns around 48% in Indus and any potential equity issuance by Vi to Indus would make the Sunil Mittal-led telecom company have an indirect ownership in Vi, which is not allowed under the law.

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