The board of Vodafone Idea (aka VIL) has announced plans for its board of directors to look at a new fundraising proposal at the end of this week.
More precisely, a meeting of the company is scheduled to be held on 21 October “to consider and evaluate a proposal for issuance of debenture securities convertible into equity shares on a preferential/private placement basis to a vendor”.
A convertible debenture is a type of long-term debt issued by a firm that can be converted into shares of equity stock after a specified period. No more information on the vendor is available, but the proposal will be subject to regulatory, statutory and shareholder approval.
As India’s Economic Times points out, the loss-making Vodafone Idea has not found it easy to generate cash, though last year’s government reforms, which included deferring of adjusted gross revenue (AGR) dues and spectrum payments and abolition of spectrum usage charges from future spectrum auctions, may have been helpful. And, of course, the Indian government is soon likely to be the largest shareholder in Vodafone Idea after the beleaguered operator’s board approved converting the interest on its arrears into equity.
Nevertheless local media outlets note that Vodafone Idea has been lagging behind its rivals in rolling out 5G or organising associated contracts. Bharti Airtel has already launched 5G services in eight cities, while Jio has started trials in four cities. Ericsson and Nokia have already announced contracts from Reliance Jio to help it build a 5G network.
Nevertheless, Vodafone Idea has made it clear that it does plan to roll out 5G services, but has not offered specific timelines for the launch or coverage. And it still has creditors to pay off including Indus Towers, which recently warned Vodafone Idea to 'pay its dues' or risk losing access to its towers from November.