Vodafone Idea in talks with Amazon, PEs for Rs 20,000 cr investment
American retail major, Amazon and a clutch of investors are in talks with the Aditya Birla group to invest up to Rs 20,000 crore in the latter’s struggling wireless telephony company, Vodafone Idea. The proceeds of the sale will be used to bid for the upcoming 5G auction of spectrum and in capital expenditure for the rollout of services by year-end, say banking sources.
Apart from Amazon, the Birla group is also talking to several private equity investors who are planning to take an exposure in the Indian telecom sector. “The talks are on with several players and an announcement on the new investors is expected soon,” said a banking source. “The talks are on to get equity investments of upto Rs 10,000 crore and rest is likely to be in debt,” the source said.
The spokespersons of the Aditya Birla group and Amazon declined to comment.
The shares of Vodafone Idea closed up 4.14 per cent to Rs 9.3 a share – giving the company a valuation of Rs 29,870 crore as on Monday.
The new investors have raised queries on the role of the Indian government in the management once the government picks up stake in the company in lieu of its dues. The company has decided that the effective date for calculation of the Net Present Value of the interest being converted to equity by the Indian government will be January 10, this year. The NPV of the interest liability on moratorium period amounting to Rs. 16,130 crore towards AGR (adjusted gross revenues) dues and deferred spectrum liabilities
“The investor will come in once this process (government acquiring stake) is completed,” the source said.
The investors are interested in investing in Vodafone Idea after the government took several steps to help the telecom sector. In March this year, the DoT issued a direction to return the financial bank guarantees related to past spectrum auctions to the company. Till date, bank guarantees worth Rs 16,000 crore have been returned – thus helping the company financially.
Besides, both promoters allo invested via fresh preferential equity infusion of Rs 4,500 crore. The shares were issued to the promoters at a price of Rs 13.3 per equity share. Of this, Vodafone Group contributed Rs 3,375 crore and the Aditya Birla Group contributed Rs. 1,125 crore. The combined shareholding of promoters after the preferential issue is 74.99 per cent. Post conversion of interest into equity, the government shareholding is expected to be 33 per cent.
The company is keen to invest in the 5G technology based services after successful testing in Pune and Gandhinagar. Following the consultation on 5G pricing, the Telecom Regulatory Authority of India (TRAI) has incorporated several requests from the industry and the 5G spectrum pricing has come down by 36 per cent from its initial estimates.
The TRAI also recommended the spectrum payments to be spread over the life of spectrum as compared to 50 percent upfront payment as in the previous auction, another step to help operators manage their cash flows more efficiently.
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