Will Vodafone Idea be able to compete with Jio and Airtel with FPO earnings?

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INVC NEWS
Mumbai  : The Vodafone Idea (VI), the country’s third largest telecom company, is currently facing a huge financial crisis. To ease its troubles, the company plans to raise Rs 18,000 crore through a follow-on public offering (FPO). This will be the country’s largest FPO, which will be subscribed from 18 to 22 April.

What is FPO?

Whenever a company wants to raise money from the public by getting listed in the stock market, it brings its IPO i.e. Initial Public Offering. It raises money from investors by selling its stake. But, sometimes it happens that financial challenges arise in front of the listed company. It has to repay its debt, strengthen its infrastructure, as has happened in the case of Vodafone Idea. In this situation, the listed company raises capital by issuing new shares to investors and this is called FPO i.e. Follow-on Public Offering.

What is the problem of Vodafone Idea?

In the year 2018, Vodafone Idea, formed by merging Aditya Birla’s group Idea Cellular and the Indian unit of British company Vodafone, is facing shortage of funds. The company has to pay the dues of vendors like Indus Towers. Vodafone Idea has to improve its 4G network to compete with Reliance Jio and Bharti Airtel. 5G services also have to be launched. Both its rival companies have started 5G services across the country. Besides, Vodafone Idea also has a debt of about Rs 45,000 crore on bank loans. The company plans to raise approximately the same amount from the funding. Currently, the government has the maximum stake of 33 percent in Vodafone Idea. The government got this stake in return for saving Vodafone Idea from sinking.

Vodafone Idea users are decreasing

The number of Vodafone Idea users is also decreasing rapidly. If we look at the data of the end of February, Jio and Airtel added 35 and 15 lakh new users respectively. At the same time, Vodafone Idea’s users decreased by 10 lakh. Vodafone Idea, which was once the country’s largest telecom company in terms of users, is now at third place with 22.25 crore users.

At number one is Reliance Jio of billionaire businessman Mukesh Ambani, which has about 47 crore users. At the same time, Sunil Mittal’s Bharti Airtel is at second place with more than 38 crore users. Brokerage firm Goldman Sachs recently estimated that if Vodafone Idea has to seriously compete with Jio and Airtel, then in the next two years Fresh capital of Rs 65,000 to 83,000 crore will be required.

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