Vodafone Idea Eyes Rural 4G Expansion to Increase Revenue Market Share, Partners with Vendors

Vodafone Idea is expected to intensify its efforts to expand 4G coverage in rural and semi-urban areas to increase its revenue market share, following Bharti Airtel's successful rural rollouts from FY23-25, analysts noted. The telecom company is also optimistic that its operational creditors, including telecom equipment manufacturers Nokia and Ericsson, as well as tower vendor Indus, will continue to support its 4G and 5G network expansion efforts despite delays in clearing their dues. 

Vodafone Idea's upcoming 4G and 5G network expansion is expected to create new business opportunities for network equipment manufacturers and Indus Towers, according to global brokerage JP Morgan.

The company's priority will be on expanding 4G coverage, followed by enhancing capacity, with the goal of closing the 20 percent population coverage gap with its peers in 4G within 17 priority circles. 

On June 13, Vodafone Idea's board approved the issuance of approximately 166 crore shares at Rs 14.80 each, aiming to raise up to Rs 2,458 crore on a preferential basis to Nokia and Ericsson to partially clear dues. By September 2024, Vodafone Idea plans to allocate Rs 1,140 crore to Nokia and Rs 703.5 crore to Ericsson, with the remaining Rs 614.5 crore designated for general corporate purposes by December 2024. 

"The fundraise from the preferential issue to Nokia and Ericsson will be used to part-pay their dues but further dilution can't be ruled out. (Since) Vi's recent capital raise is earmarked for new capex, we wouldn't rule out further equity swaps and dilution to vendors in the future to clear operational dues," JP Morgan said.

The telco's CFO informed analysts that capital expenditure can drive subscriber gains over the next 12 months by decongesting the network, enhancing customer experience, and retaining users who upgrade from feature phones to smartphones. 

While the telco plans to invest $5.4-6.6 billion in capital expenditure over the next three years, it is expected to experience some front-loaded capex as it strives to close the gap with its peers as quickly as possible. The overall capex is likely to be distributed across three priorities: expanding 4G coverage, building 4G capacity, and rolling out 5G.