Vodafone Idea Shares Surge Following $3.6 Billion Deal with Major Network Equipment Providers

In a significant development for the telecom sector, Vodafone Idea‘s share price increased by over 8% during early trading on Monday. This surge follows the announcement of a substantial $3.6 billion agreement with major network equipment suppliers Nokia, Ericsson, and Samsung. The deal, which involves the supply of network equipment over a three-year period, was confirmed by Vodafone Idea in a stock exchange filing dated September 22.

The agreement is seen as a pivotal step for Vodafone Idea’s ambitious three-year capital expenditure plan, which amounts to approximately $6.6 billion (around Rs. 550 billion). The capital investment is aimed at expanding 4G coverage from 1.03 billion to 1.2 billion people and initiating 5G services in key markets, alongside expanding capacity to meet rising data demands. This marks the first time Samsung has been included as a partner while Nokia and Ericsson continue their long-term collaboration with the telecom firm.

Shares of Vodafone Idea rose to as much as Rs. 11.42 apiece on the Bombay Stock Exchange (BSE), reflecting an 8.96% increase. At 9:30 AM, the shares were trading at Rs. 11.33, representing an 8.11% improvement.

Further bolstering its plans, Vodafone Idea recently raised Rs. 240 billion in equity and acquired additional spectrum worth Rs. 35 billion during the June 2024 auction. The funds are being used for rapid capital expenditures, including deploying more spectrum on existing sites and establishing new sites, thereby augmenting capacity by approximately 15% and increasing population coverage by 16 million as of the end of September 2024.

Currently, the capital expenditure is being funded from the recent equity raise. For future expenditures, Vodafone Idea is in advanced discussions with both current and potential lenders to secure Rs. 250 billion in funded facilities and Rs. 100 billion in non-funded facilities, the company disclosed.

However, despite these developments, Vodafone Idea faces financial challenges. Last week, the telecom giant’s shares came under pressure after the Supreme Court of India dismissed a plea concerning the re-evaluation of adjusted gross revenues (AGR) dues. In their Q4FY24 earnings call, the company’s management expressed the need for a Rs. 60 billion adjustment to the base AGR amount and a correction of Rs. 350 billion on the total dues, calculated to be around Rs. 700 billion. The Supreme Court’s decision has been perceived as a setback to Vodafone Idea’s financial recovery strategy.

Analysts from brokerage firm Nuvama Institutional Equities maintained a ‘Hold’ rating for Vodafone Idea shares, setting a 12-month target price of Rs. 11.5. The firm noted that the recent 20% decline in stock value has already accounted for the additional liabilities anticipated following the Supreme Court’s verdict. They further stated that going forward, emphasis would be on Vodafone Idea’s operational metrics, including subscriber retention, tariff adjustments, and capital expenditure execution speed.

Vodafone Idea’s stock has seen significant fluctuations recently, decreasing nearly 15% over one week, over 28% over one month, and more than 33% over three months. Year-to-date, the stock has lost almost 29% of its value.