Vodafone Idea may issue equity shares to Nokia, Ericsson to settle dues

Vi's key vendors also include Indus Towers. While the company owes the largest chunk of its arrears to the tower company at around ₹10,000 crore, Vi has been paying its current rent to in full.

It is estimated to owe ₹3,000 crore to Finland's Nokia and ₹500 crore to Sweden's Ericsson.

The lossmaking telco, which recently raised ₹20,075 crore via a public and a preferential allotment to co-promoter Aditya Birla Group (ABG), said late Monday that its board will meet Thursday (June 13) to consider issuing equity shares and/or convertible securities on a preferential basis to vendors.

Vi, Nokia and Ericsson did not respond to ET's questions. An Indus Towers spokeswoman declined to comment.

"Assuming the preferential allotment is done at a price of ₹15 per share, for an issue of ₹3,500 crore worth of shares, it would mean an equity dilution of nearly 2.8-3.0%," a Mumbai-based research analyst said.

One of the people cited isn't ruling out the possibility of Vi exploring an allotment of optionally convertible debentures (OCDs) to its two European vendors against its dues. This was what the carrier, which is also co-owned by UK's Vodafone Group PLC, had offered its erstwhile vendor, US tower company ATC's India unit, last year.

In February 2023, Vi had allotted OCDs worth ₹1,600 crore to ATC Telecom Infrastructure Pvt Ltd against its dues. ATC converted the OCDs into a 2.87% stake which it sold recently at an average price of ₹12.78 a share.

Analysts expect the two European vendors to demand a sharp discount to Vi's current market price.

Shares of Vi closed nearly 2.5% higher at ₹16.20 on the BSE Tuesday, giving it a market value of nearly ₹1.08 lakh crore.

Vi recently cleared an allotment of equity shares to ABG at an issue price of ₹14.87 per equity share. Its recent follow-on public offer, which was subscribed seven times, was priced at ₹11 per share.

The latest developments come at a time when Vi is known to be trying to speed up its discussions with Nokia and Ericsson to place fresh purchase orders to upgrade its 4G networks as well as explore initial 5G contracts.

It is also looking to borrow ₹25,000 crore from banks and financial institutions and line up an extra ₹10,000 crore via non-fund-based facilities.

Vi plans to deploy its targeted ₹50,000-55,000 crore funding for capex over the next three years to boost 4G coverage to arrest customer losses and kickstart greenfield 5G rollouts in key markets.

This is vital for the telco's survival and its ability to compete with bigger rivals Reliance Jio and Bharti Airtel which have already rolled out pan-India 5G networks.