Vodafone Idea Shares Surge After $3.6 Billion Capex Deal with Vendors

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Vodafone Idea Shares Surge After $3.6 Billion Capex Deal with Vendors

This boost comes after the company announced a mega capex deal worth $3.6 billion (₹30,000 crore) with major global network equipment suppliers.

September 23rd, 2024 News

Vodafone Idea Ltd., the debt-laden telecom operator, saw a significant rise in its stock price on Monday, with shares jumping up to 7% in early trading. This boost comes after the company announced a mega capex deal worth $3.6 billion (₹30,000 crore) with major global network equipment suppliers. The move marks a pivotal step in the company's ambitious network expansion plans, which aim to solidify its market position and improve service coverage across India.

Key Highlights of the Deal:

$3.6 Billion Capex Agreement: Vodafone Idea signed a deal with long-term partners Nokia and Ericsson, while also onboarding Samsung as a new partner.
Three-Year Supply Period: The agreement spans over three years, focusing on delivering the necessary network equipment to support the company's expansion initiatives.

The Bigger Picture: Expanding Coverage and Boosting Capacity

This latest deal is the first phase of Vodafone Idea’s larger three-year capex plan, valued at $6.6 billion (₹55,000 crore). The company's focus is to:

Expand 4G coverage from the current 1.03 billion to 1.2 billion people across India.
Launch 5G services in key markets.
Enhance overall network capacity in line with the increasing demand for data.

Vodafone Idea emphasized that this expansion will lead to efficiency gains through better energy usage, ultimately lowering operating costs.

Recent Fundraising and Spectrum Acquisition

The capex deal follows Vodafone Idea’s recent equity raise of ₹24,000 crore, along with an additional ₹3,500 crore spectrum acquisition in June 2024. These actions have allowed the company to execute several "quick-win" capex projects, such as:

Deploying additional spectrum at existing sites.
Rolling out new sites to improve coverage.

As a result, these efforts are expected to boost capacity by 15% and increase population coverage by 1.6 crore by the end of September 2024.

AGR Dues and Analyst Briefing

Despite this positive development, Vodafone Idea continues to face financial challenges, particularly regarding its Adjusted Gross Revenue (AGR) dues, which currently stand at over ₹70,300 crore. The issue intensified after the Supreme Court dismissed petitions from telecom operators, including Vodafone Idea, regarding the re-calculation of AGR dues.

In response to these ongoing financial concerns, Vodafone Idea’s senior management, including CEO Akshaya Moondra and CFO Murthy GVAS, will host an analyst call on Monday from 2:30 PM to 3 PM. The discussion will provide updates on the company's current financial status, including details on the AGR dues.

Stock Performance

Following the announcement of the capex deal, Vodafone Idea shares rose 7% to ₹11.2 during early trading on Monday. However, the stock has been under pressure throughout the year, having declined over 35% in 2024 thus far.

Key Points to Note:

Capex Deal: Vodafone Idea has signed a $3.6 billion (₹30,000 crore) capex agreement with Nokia, Ericsson, and Samsung for network expansion over three years.
Three-Year Capex Plan: This deal marks the start of Vodafone Idea’s $6.6 billion (₹55,000 crore) three-year investment plan focused on expanding 4G and launching 5G.
Efficiency Gains: The new equipment will bring energy efficiency, reducing operating costs in the long run.
Quick-Win Capex Projects: Vodafone Idea has already begun deploying additional spectrum at existing sites, increasing network capacity by 15% and expanding coverage to an additional 1.6 crore people by September 2024.
AGR Dues: Vodafone Idea still faces over ₹70,300 crore in AGR dues, with an analyst briefing scheduled to provide more details on the matter.
Stock Surge: Shares rose 7% after the capex deal, though the stock has fallen over 35% year-to-date.

This significant investment marks a crucial step in Vodafone Idea’s attempt to stabilize and grow its presence in India's highly competitive telecom market.