Shares of debt-ridden Vodafone Idea soared by 10%, reaching a day’s high of Rs 11.94 on the Bombay Stock Exchange (BSE) after the company announced on Sunday that it has signed agreements worth $3.6 billion (Rs 30,000 crore) with Nokia, Ericsson, and Samsung to source telecom equipment over three years for 4G network expansion and 5G rollouts.
Enhancing Competitiveness Against Rivals
This deal represents a crucial step for Vodafone Idea in enhancing its competitiveness against stronger rivals like Reliance Jio and Bharti Airtel while aiming to reduce user losses. In a filing to the exchanges, the company stated, “Vodafone Idea (“VIL ” or”Company “) has concluded a mega ~USD 3.6 billion (~Rs. 300 billion) deal with Nokia, Ericsson, and Samsung for the supply of network equipment over a period of three years.”
Transformative Three-Year Capex Plan
The agreement marks the initial phase of the company’s transformative three-year capital expenditure (capex) plan, valued at approximately $6.6 billion (Rs 55,000 crore).
This capex program is focused on expanding 4G population coverage from 1.03 billion to 1.2 billion, launching 5G in key markets, and facilitating capacity expansion in line with data growth. The company has retained its long-term partners, Nokia and Ericsson, while also onboarding Samsung as a new partner.
Recent Financial Updates
Vodafone Idea recently raised Rs 24,000 crore through a share sale, further solidifying its financial position. Although the company did not specify the exact allocations within the deals, media reports suggest that approximately 40% of the contracts may go to Ericsson and Nokia, with the remaining 20% to Samsung. Supplies under these network deals are expected to commence in the coming quarter, with expanding 4G coverage prioritized.
Competitive Landscape and Burden of AGR Dues
In a competitive landscape, rival Bharti Airtel is also planning to invest $1 billion in capital expenditure over the next three years to enhance its 4G coverage.
Vodafone Idea’s stock has drawn attention recently, especially after the Supreme Court dismissed the telecom operator’s plea in the Adjusted Gross Revenue (AGR) case, upholding the full amount of the AGR demand. This ruling translates into a financial burden of Rs 58,000 crore on the company, which, including interest, has now risen to Rs 70,320 crore as of the end of FY24.
Vodafone Idea Share Reaction in Last one year
The shares of Vodafone Idea have demonstrated negative returns across various time intervals. In the last month, the stock delivered a negative return of 30.03%. Over the past six months, it exhibited a significant decline, with negative returns of 16.84%, indicating a strong downtrend.
Year-to-date figures further emphasize the stock’s bearish trend, recording negative returns of 34.82%. Looking at the broader horizon, the shares have shown consistent weakness, with negative returns of 3.18% over the last year.
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