Voda Idea CEO hopes to arrest telco's subscriber loss with FPO, fundraise

New Delhi: Buoyed by investors like GQG lapping up shares reserved for anchor investors, Vodafone Idea CEO Akshaya Moondra on Wednesday expressed confidence that the FPO will sail through, providing the loss-making telco funds for network expansion that he hoped will help arrest the loss of subscribers.

In an interview, the top honcho said the just-concluded anchor book allocation that drew in big global and domestic names has been a "good start" and gives VIL confidence about the progress of the fundraising exercise. Moondra said he does not believe that Vodafone-Idea's "somewhat later entry" into 5G would impact the telco in the long run. In fact, the company has the benefit of learning from how the market has evolved in the last 1-1.5 years since the launch of 5G and accordingly calibrate and fine-tune its investments in this space.

The VIL CEO asserted the significant need for a tariff correction, saying the industry has not been returning the cost of capital even in the 4G era, and the situation has been accentuated with the advent of 5G. The last two rounds of price hikes did not alter customer behaviour nor lead to loss of customers, and hence, the quantum of increase in the past seems to have gone down well in the market. "There is a significant necessity to having tariff correction so that the industry will start returning its cost of capital," he said but declined to comment on the timing of the tariff increases will play out in the market.

The buzz about VIL-Starlink link-ups in the past have been pure market speculations that the Indian telco has already denied, Moondra said and pointed out that "there is nothing further I have to add to that". Moondra said the government has always been supportive, and the recent commentary from officials on VIL's capital investment plans reaffirms that commitment articulated in the past.

Just ahead of its FPO opening to public investors, Vodafone Idea has announced the closure of its anchor book allocation, raising about Rs5,400 crore from marquee global investors like GQG Partners Emerging Markets Equity Fund, Fidelity, UBS Fund Management, Abu Dhabi Investment Authority, Australian Super, Troo Capital, Morgan Stanley, Citigroup Global Markets Mauritius, and Jupiter Fund Management. Besides, domestic investors, including Motilal Oswal Mutual Fund, HDFC Mutual Fund, SBI General Insurance and Quant Mutual Fund, were allocated shares in the anchor round.

The Rs 18,000-crore FPO of Vodafone Idea will open for public subscription on April 18 and conclude on April 22 - marking the biggest FPO in the country. "...today what is happening is that because of lack of investments, we have not been able to participate in the growth and so, while others have been gaining market share, we have been losing market share...as we make investments and largely cover our 4G population coverage gap with reference to our peers, we will be able to participate in the entire market, which will then enable us to arrest the loss of subscribers," he said.

The total fundraising blueprint - a mix of equity and debt funding (for which discussions are on with lenders) - will enable the company to effectively implement its market strategy. "...it is not necessary that we are looking at a gain in market share, but we have not been participating in industry growth until now. And these investments are addressing our coverage gaps and some of the other competitive disadvantage which we've had with reference to coverage and investments...we will be able to compete on a better basis going forward," the VIL CEO said. The mega fundraise by VIL, which comes close on the heels of a Rs 2,075 crore fund infusion by the Aditya Birla Group via a preferential share issue earlier this month, is significant as it enables VIL to ready a war chest for the much-delayed 5G rollout and strengthening 4G services. VIL has been haemorrhaging subscribers month after month and fighting a desperate battle for survival, saddled with a debt of Rs 2.1 lakh crore and quarterly losses.