Vodafone Idea signs $3.6b contract with Nokia, Ericsson and Samsung

• Telecom operator is in advanced discussions to secure loans and bank guarantees amounting to $4.2b through a share sale.
• Agreement represents largest deal finalised by any Indian telecom operator in the current year.

India’s Vodafone Idea Ltd (VIL) has announced a landmark $3.6 billion contract with leading telecommunications companies, Nokia, Ericsson and Samsung Electronics, to upgrade its network infrastructure.

The agreement represents the largest deal finalised by any Indian telecom operator in the current year.

The partnership with industry giants come as VIL embarks on a comprehensive three−year capital expenditure plan estimated to reach $6.6 billion.

The primary focus of this capital expenditure program is to enhance 4G coverage, expanding the population coverage from 1.03 billion to 1.2 billion, while simultaneously initiating the deployment of 5G technology in critical areas.

The strategic move is essential for VIL to align with the rapidly evolving telecommunications landscape, marked by an exponential increase in data consumption. Notably, the equipment supply is slated to commence within the upcoming quarter, signaling an accelerated pace towards implementation.

Financial maneuvering

VIL’s commitment to this extensive upgrade is further underscored by its recent successful capital raise of $2.2 billion through a share sale in April, aimed at funding this contract.

Additionally, the company is reportedly engaged in advanced discussions to secure loans and bank guarantees amounting to Rs350 billion ($4.2 billion) through a share sale, aimed at funding this contract.

This financial maneuvering is crucial, given VIL’s current subscriber base decline—from 40.8 crore at its inception in 2018 to 21.5 crore as per recent data from the Telecom Regulatory Authority of India (TRAI).

CEO Akshaya Moondra has articulated a vision for a transformative period for VIL, referred to as “VIL 2.0.”

Payment obligations

This phase signifies a renewed commitment to not only stabilise its market position but to capitalise on emerging industry growth opportunities.

The partnership with established vendors Nokia and Ericsson, along with the new alliance with Samsung, is viewed as a strategic step forward in enhancing customer experience and operational efficiency in selected regions that have already benefited from network improvements.

Despite the intimidating financial backdrop—characterised by significant government payment obligations exceeding Rs2,09,520 crore as of June 30, 2024—VIL appears poised to leverage its substantial spectrum portfolio, which includes mid-band and millimetre-wave 5G spectrum across numerous circles.

The forward-looking investments and strategic partnerships signify a potential turning point for VIL, enabling a robust response to competitive pressures in the Indian telecom sector.