Vodafone Idea hands $3.6 bn contracts to Nokia, Ericsson, Samsung for 4G, 5G gear

Vodafone Idea will spend $3.6 billion (about ₹30,000 crore) on network equipment over next three years, the contracts for which have been given out to Nokia, Ericsson and Samsung, India’s No 3 carrier said on Sunday.

“We are committed to invest in emerging network technologies to provide a best-in-class experience to our customers. We have kickstarted the investment cycle. We are on our journey of VIL 2.0 and from hereon, VIL will stage a smart turnaround to effectively participate in the industry growth opportunities,” Akshaya Moondra, chief executive officer of Vodafone Idea Ltd, said. “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.”

Finnish telecom gear maker Nokia and Sweden's Ericsson are long-time vendors to the debt-laden carrier and are now shareholders after converting part of their dues that Vi owes them into equity. South Korean electronics major Samsung has also been providing gear to rival Bharti Airtel.

Also Read: Vodafone Idea signs ₹30,000 crore deal with Nokia, Ericsson, Samsung for 4G, 5G gear

According to people aware of the details of the deal, the contracts are likely to be split equally among the three telecom gear makers.

The contracts have been funded by recent equity raise of nearly ₹24,000 crore, including ₹18,000 crore Vi raised from the country's largest follow-on public offer in April. Mint had reported last week that Vi was close to signing deals with vendors, even though there has been five-month delay between it raising the funds and the deals being announced.

The supplies against these new long-term awards will start in the coming quarter.

First step towards rollout of company’s ₹55,000 crore capex plan

The deal marks the first step towards the rollout of the company’s three-year capex plan of ₹55,000 crore ($6.6 billion), directed at expanding the 4G population coverage from 1.03 billion to 1.2 billion, capacity expansion in line with data growth, and launching 5G in key markets.

Also Read: Govt to own 35.8% in Vodafone Idea after conversion of AGR dues into equity

Vi will get its hands on the latest equipment that can be used to offer enhanced customer experience, and use valuable insights obtained by the vendors in the Indian market over the last two years. This will enable the telco to adopt a more flexible and modular rollout plan by customising the services for 4G and 5G technologies. In addition, the new equipment will also lead to efficiency gains in energy and thus lower operating costs.

The top priority for the company is to expand the 4G coverage to 1.2 billion Indians. Moondra said that Vi had deployed more spectrum on existing sites and also rolled out some new sites, which has resulted in about 15% boost in capacity and an increase in population coverage by 16 million by end September. "We are already witnessing an improvement in customer experience in select geographies where these rollouts have been completed," he added.

Vodafone Idea had been trying to raise funds since September 2020, and could not invest in enhancing its 4G network due to due to the paucity of funding. It was unable to launch 5G despite having bought spectrum back in 2022, even as rivals Airtel and Jio covered the entire country within 18 months beginning October 2022. Loss-making Vodafone Idea is saddled with a debt of ₹2.1 trillion, of which ₹1.39 trillion is for deferred spectrum and ₹70,300 crore in adjusted gross revenue (AGR) dues.

Also Read: SC rejects Vodafone, Airtel curative petition hearing; ₹1.47 trillion AGR demand stands

The Aditya Birla group-owned telecom services provider got an adverse result from the Supreme Court that ruled against reviewing of its adjusted gross revenue dues owed to the government, quashing hopes of getting relief of up to ₹35,000 crore. The telecom operator, however, is looking to raise fresh debt.

Moondra said that for long-term capex, Vi was in advanced stage of discussions with its existing and new lenders to tie up ₹25,000 crore of funded and ₹10,000 crore of non-fund-based facilities.

One of the major steps in this process was the recent completion of techno-economic evaluation of the company’s long-term projections by an independent third party, which was recently completed, he said. “The report has been submitted to all the banks and financial institutions. Basis this report the banks will now progress with their internal evaluation and approval processes."