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Vodafone Idea's successful FPO likely to end Reliance Jio and Airtel's dominance: Report

Vodafone Idea's successful FPO likely to end Reliance Jio and Airtel's dominance: Report

| @indiablooms | 23 Apr 2024, 09:24 pm

Mumbai: Cash-strapped Vodafone Idea’s Rs 18,000 crore follow-on public offer (FPO) has been fully subscribed, giving a much-needed push to enable the telco to compete with Reliance Jio and Bharti Airtel, media reports said.

A Moneycontrol article cited analysts as saying that this will ensure India remains a three-private telco market as the company plans to invest the funds for expanding 4G coverage and introducing 5G services will aid in reducing customer turnover and securing valuable, top-paying clients in key markets

Industry experts also suggest that Vodafone Idea could potentially gain advantages by entering the 5G market later, as it can learn from larger competitors who have already established nationwide 5G networks, it noted.

By the last date of bidding on April 22, Vodafone Idea's follow-on public offer (FPO) saw a subscription rate of 6.36 times, with investors vying for 8,011.8 crore equity shares.

The telecom giant ranked third in the nation, offered 1,260 crore shares in this FPO, amounting to a total of Rs 18,000 crore, marking it as the largest offering of its kind in the country.

This FPO aligns with Vodafone Idea’s broader objective of raising Rs 45,000 crore through a blend of debt and equity.

With nearly 22 crore subscribers, over twice that of BSNL, VIL’s strong existence is critical to maintaining a competitive market, analysts opined, adding that the government has also spoken against a duopoly or concentrated market.

As its financial situation improves, Vodafone Idea could consider opting either to settle its spectrum and AGR dues or engaging in discussions with the government to transform outstanding dues into equity at current share values. The choice of strategy would hinge on VI's evaluation of its financial stability and the approach that best supports its long-term viability, noted one of the analysts cited by Moneycontrol.

Additionally, the Department of Telecommunications (DoT) holds the view that the structure of the country’s telecom market is sound, particularly with Vodafone Idea solidifying its intentions to enhance its 4G and 5G infrastructures, Moneycontrol quoted Neeraj Mittal, the Secretary of DoT, as saying.

Vodafone Idea's Chief Executive Akshaya Moondra, on April 17, told Moneycontrol that the telco’s focus is to expand its 4G coverage to match the competition. “We believe we have been a very competitive player in the past. With investments coming in, there is no reason why we will not be competitive going forward and participate in the growth story,” Moondra said, adding that 4G expansion is the telco’s topmost priority.

Moondra stated that the company’s primary objective is to deliver high-quality 4G coverage to mitigate subscriber turnover. He pointed out that the decline in subscribers was not due to the introduction of 5G. “The lack of 4G coverage, which is significant, is the reason for the loss of subscribers,” he told the publication.

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