Vodafone Idea to Sell Assets to raise $1 Billion amid Liquidity Issues

Vodafone Idea is planning to raise around $1 billion, by selling its fixed line, optic fiber and data center businesses. This move comes as the telco looks to generate funds to fulfil liabilities.

Vodafone Idea Looking to Offload Subsidiaries

An investment banker aware of the developments said, "Vodafone Idea is expecting between $800 million and $1 billion (from the broadband, optic fibre and data centre sales) but investors are not very keen at these price points". A second person said that the proposed fibre asset sale could happen on a "sale and leaseback model". Basically, the telco will sell the asset, and acquire them again on a long-term lease.

The telco has a liability of ₹22,500 crore between December 2021 and April 2022. Vodafone Idea has to pay that much towards regular debt, AGR and spectrum dues. Last week, the telco announced a loss of ₹6,985.1 crore for Q4 20-21.

This is not the first time the telco has tried to raise funds. Since September, the telco has tried to close a ₹25,000 crore fundraiser. However, after several rounds of discussions, the fundraiser still stands at an impasse. Last week, Vi CFO Akshaya Moondra said the telco expects to generate an additional ₹3,000 crore in cash this fiscal year from tax refunds. It will also sell some land that it acquired for data centers.

Vodafone Idea has one data center in Navi Mumbai and around 160,000 km of optic fibre. Also, its fixed line broadband business is housed under a subsidiary, You Broadband. Vodafone Idea acquired You Broadband from TRG Capital in 2017 for ₹400 crore. It has over 3,000 km of optic fiber and double that in last-mile cables.

The telco has already tried selling the fiber assets and data centers in 2019. Back then, talks fell through due to difference in valuations. However, right now, Vodafone Idea is desperate to sell, so there are slim chances of a valuation difference.

Below Cost Tariffs in Telecom not Viable - Vodafone Idea

Vodafone Idea had written to the DoT on 25th June, notifying the department of its financial struggles. The primary objective of the letter was to seek another year of moratorium on its spectrum dues. Notably, the telco has spectrum dues of ₹8,292 crore, payable on April 9, 2022. It said that its operations were not generating adequate cash. Also, it said that the stress in the industry due to ‘below cost’ tariffs was undermining its efforts to raise the ₹25,000 crore it had announced last September.

The telco raised concerns around its viability again, saying that it will monetize some assets or negotiate better terms with lenders. The telco said it had classified ₹8,547.2 crore under ‘current maturities of long-term debt,’ moving it from ‘non-current borrowings’ for "not meeting certain covenant clauses under the financial agreements for specified financial ratios as at 31 March 2021".

However, Telecom Watchdog, an NGO, has written to telecom minister Ravi Shankar Prasad on Saturday, seeking a forensic audit of Vi. The NGO said that it has asked the government to reject any requests for relief. It further said that Vodafone Idea's struggles reflect mismanagement. It also said that the telco is "misleading" the government with incorrect facts, despite having financially sound promoters.