Vodafone Idea forms pension funds to raise $ 1 billion, Telecom News, ET Telecom

Mumbai | New Delhi: Vodafone Idea (Vi) has approached pension funds, including the Norwegian Global Government Pension Fund and three Canadian funds, such as the Canada Pension Plan Investment Board (CPPIB), to raise around $ 1 billion ( $ 6,000-7,000 million) to keep operations in India afloat, said people familiar with the issue.

“Vodafone Idea has contacted the Global Government Pension Fund of Norway and Canada, the Pension Plan Investment Board (CPPIB), the Caisse de Dépôt et Placement du Québec (CDPQ) and the Ontario Teachers’ Pension Plan (OTPP).” said one of the people. . “The thinking process for now is that this would not be a direct equity transaction, but a debt convertible into equity.”

The company is also considering contacting an Australian pension fund.

The Indian telecommunications joint venture, which was not cashed between the Aditya Birla Group and the Vodafone Group in the United Kingdom, was linked to BofA Securities as an investment banker.

Aditya Birla Group, Vodafone Idea, the Norwegian fund, CDPQ and BofA Securities did not answer ET’s questions. Vodafone Group, CPPIB and OTPP declined to comment.

“The reason he contacted the pension funds is that the company wants a patient investor to stay for a longer period,” giving the phone time to return to its loss operations, the person quoted above said. He said that “the structure of capital raising is fluid” at this time. The development is taking place as attempts to raise capital through private equity have failed.

ET reported last month that Vi has reached a new set of US private equity firms, including KKR and Carlyle Group, to secure $ 2-2.5 billion through convertible instruments following fundraising talks with a consortium driven from Oak Hill.

“Vodafone Idea will need capital in the long run if they are to continue operating in India’s telecommunications space, but private equity investors with a three- to five-year investment horizon are reluctant to do so,” said a banker. investment with direct knowledge about matters. “On the other hand, most pension funds can wait 10 years for a comeback, and that makes sense for both.”

Another person aware of this development said that the company is exploring several options and could also float a separate vehicle and allow more than one pension fund to invest in it.

“The talks have just begun and there are several options,” he said. “The idea is to increase debt through pension funds, but also to give them an option to partially convert their equity at a later stage.”

The financing is part of the declared telecommunications plans to raise a total amount of 25,000 lei, through a mixture of debts and equity.

“The current cash generation of Vodafone Idea is insufficient to finance its interest costs, so debt management is a huge challenge for the company,” said Nitin Soni, CEO of Fitch Ratings, stressing the urgency of raising funds. “You have to increase your rates to improve your cash generation. However, if it improves fares, it risks losing market share to Reliance Jio Infocomm and Bharti Airtel. ”

The company urgently needs cash to consolidate its 4G operations in 16 priority circles and to stop the constant loss of subscribers and also clear statutory taxes to the government. It has Rs 50,400 of adjusted gross income (AGR) paid to the government over 10 annual installments until March 31, 2031. The annual spectrum payment rates of Rs 15,500 will start from FY 23, once the moratorium ends, Ambit Capital estimates.

In the December quarter, Vi’s revenue rose less than 1% from the quarter, compared to Airtel’s 6.8% increase and Jio’s 5.8% increase. Its average revenue per user (ARPU) at the end of December was Rs 121, behind Rs 166 and Jio Rs 151 from Airtel.