Vodafone Idea's sizeable kit order adds Samsung to its supplier roster

Embattled Indian operator Vodafone Idea (Vi) is making headway with its capex programme, announcing $3.6 billion worth of equipment deals.

Nick Wood

September 23, 2024

3 Min Read

It marks the biggest single capital expenditure since the two completed their merger in 2018. Shares surged on the news, suggesting that investors were cheered by Vi making good on its previously-announced pledge to upgrade and expand its networks.

That plan, unveiled in May, will see Vi spend between $6 billion and $6.6 billion over the next three years to expand 4G population coverage in 17 of India's telecom service areas – called circles – and launch 5G in major cities.

This initial order will focus on extending the reach of 4G to 1.2 billion people from 1.03 billion. Vi said the new equipment is more energy efficient, which should bring down operating costs.

The news will come as something of a relief for existing suppliers Ericsson and Nokia, which have been hit hard by slowing 5G capex, particularly in India.

In Q2 , Ericsson reported a 44% year-on-year slump in revenue from South East Asia, Oceania and India, primarily due to India. Nokia sales in India fell almost 70% during the same quarter.

Vi's announcement also marks the start of what could prove to be a lucrative partnership with Samsung, which has also been struggling amid the capex crunch.

According to local press, Vi has been trying out the Korean kit maker's equipment in Chennai over the last 12-18 months, and recently extended these trials to two additional circles. With this announcement, it has taken the plunge and formally added Samsung to its roster of RAN suppliers.

"We have kickstarted the investment cycle. We are on our journey of VIL (Vodafone Idea Limited) 2.0 and from here-on, VIL will stage a smart turnaround to effectively participate in the industry growth opportunities," said VI chief exec Akshaya Moondra. "Nokia and Ericsson have been our partners since our inception and this marks another milestone in that continuing partnership. We are pleased to start our new partnership with Samsung. We look forward to work closely with all our partners as we move into the 5G era."

Cash-strapped Vi's finances always face intense scrutiny, so it's only natural that it explains how it intends to pay for all this.

In the immediate term, the capex will be funded by the recent equity raise, which brought in $2.16 billion. It is also in advanced discussions with new and existing lenders regarding INR250 billion ($2.99 billion) of funded and INR100 billion ($1.2 billion) of non-funded debt financing.

"One of the major steps in this process was the completion of techno-economic evaluation of the company's long-term projections by an independent third party, which was recently completed. The report has been submitted to all the banks and financial institutions," Vi said.

Unfortunately for Vi, its financial prospects took a hit last week when India's Supreme Court ruled against telcos in their effort to recalculate the spectrum and licence fees they owe to the government. According to the Economic Times, Vi could be on the hook for $4 billion-$5 billion per year, potentially leaving it short of funds by the second half of fiscal 2026.

So while it's good to see Vi pushing on with getting its networks into better shape, it is by no means out of the woods yet.

About the Author

Nick Wood

Nick is a freelancer who has covered the global telecoms industry for more than 15 years. Areas of expertise include operator strategies; M&As; and emerging technologies, among others. As a freelancer, Nick has contributed news and features for many well-known industry publications. Before that, he wrote daily news and regular features as deputy editor of Total Telecom. He has a first-class honours degree in journalism from the University of Westminster.

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