Will this deal save Vodafone-Idea’s sinking boat? The matter is worth Rs. 30,000 crore
Telecom company Vodafone Idea (Vi), which is facing a cash crunch and heavy debt, has struck a deal worth $3.6 billion (about Rs 30,000 crore) with Nokia, Ericsson and Samsung. This deal has been done for the supply of network equipment over a period of three years. The company has planned a capex of $6.6 billion for three years. This deal is the first step in that direction. The company says that its capex target is to increase 4G coverage from 1.03 billion to 1.2 billion, launch 5G in key markets and expand capacity in line with data growth.
The company said that it has continued to work with its existing long-term partners Nokia and Ericsson and has also added Samsung as a new partner. These contracts will help the company to immediately take advantage of the latest cutting-edge equipment to provide better customer experience. Supplies from the new deal will start in the upcoming quarter. The top priority for the company is to expand 4G coverage to 1.2 billion Indians. The company said that we are committed to investing in emerging network technologies to provide best-in-class experience to our customers.
What is the company’s target?
Vodafone Idea big deal: The statement said that the target of this capital expenditure program is to increase the scope of 4G population from 1.03 billion to 1.2 billion, launch 5G service in key markets, and expand capacity in line with data growth. The supply under these new long-term contracts will start in the next quarter. The statement said that the expansion of 4G service (coverage) to 1.2 billion Indians is the company’s top priority. Now the question here is whether this will save the sinking ship of the company. Because the fall in the company’s shares is not pointing towards this.
Stock down 20 percent
Let us tell you that when Vodafone and Idea merged, it became the country’s largest telecom company. But everyone knows about its condition now. The company’s shares are also in a similar condition, which fell by more than 20 percent in the last two trading sessions. Currently, the closing price of the company’s shares is around Rs. 10.
Setback from the Supreme Court
The company said that we have kickstarted the investment cycle. Nokia and Ericsson have been our partners since our inception and this is another milestone in that continuous partnership. We are happy to start our new partnership with Samsung. Akshay Mundra, CEO, Vodafone Idea Limited, said, “We look forward to working closely with all our partners as we enter the 5G era.”
The major reason for the recent fall in Vodafone-Idea shares is a decision of the Supreme Court. The Supreme Court this week dismissed several petitions of telecom companies including Vodafone Idea, seeking recalculation of the AGR of the companies. VI owed the government Rs. 2,03,430 crore as of March 31, 2024. The total dues include deferred spectrum payment of Rs. 1,33,110 crore and AGR dues of Rs. 70,320 crore. The company was hoping that the court would give it relief on payment. After the court’s decision, the company’s shares fell 20 percent on Thursday.
Vodafone Idea is already burdened with heavy debt. In contrast, the company recently issued its FPO so that it could raise some money to improve its financial condition. The effect of this is that now the company has 63,05,98,03,922 (6,305 crore) shares in the market. The total market capitalization of the company is slightly more than the amount it owes to the government. This amount is Rs. 71,304.75 crore.
What do experts say?
Looking at these figures of the company, most of the market experts say that the company’s stock is currently in a difficult phase. A report by Nomura India says that this is the worst phase of Vodafone Idea, which is now being left behind. However, other experts do not seem to agree on this.
According to a report by Business Standard, Nomura gives it a buy rating. On the other hand, Nuwama Institutional Equities gives it a hold rating, JM Financials gives it a sell rating and Goldman Sachs gives it an underperform rating.
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