TPG Capital, Apollo Global and Carlyle Group are among private equity giants in early talks with Vodafone Idea Ltd to invest in the company’s optic fibre and data centre assets worth around $1 billion, said two people familiar with the matter.
Since Vodafone Idea will continue to use the optic fibre infrastructure, the deals will likely happen on a sale-and-leaseback basis, the people said on the condition of anonymity.
“The fibre assets, fixed broadband and data centre businesses have an immense growth potential since telecom and internet penetration is rapidly increasing. Pricing will be the key for the PE deals. Within 2-3 months, the deals should get closed,” one of the two people said.
Vodafone Idea, which is burdened by liabilities of ₹1.8 lakh crore, including immediately payable adjusted gross revenue (AGR) dues, has so far failed to secure investments either as direct equity or hybrid debt.
A spokesperson for TPG Capital and Carlyle declined to comment. Vodafone Idea did not respond to an emailed query.
“India’s telecom industry is likely to get into a consolidation mode for the next three years, but the value of optic fibre network, data centre and broadband will remain and grow, whoever remains as the investor or the owner,” said the first person.
{{/usCountry}}“India’s telecom industry is likely to get into a consolidation mode for the next three years, but the value of optic fibre network, data centre and broadband will remain and grow, whoever remains as the investor or the owner,” said the first person.
{{/usCountry}}“Also, there are indications that the government may take necessary steps to end the era of predatory pricing by any telecom service provider. Tariffs will increase to justifiable levels. This will ameliorate the situation,” said the second person.
Vodafone Idea announced last year that it would raise ₹25,000 crore through a mix of equity and debt issuances.
“If the deal with the PE investors goes through, it will at least give the telco the ability to pay the immediately payable AGR and spectrum dues and enough working capital for the year,” said the first person.
Last Friday, the debt-laden telco said it is in active talks with potential investors for fundraising. Vodafone Idea has a data centre in Navi Mumbai and 160,000km of optic fibre.
Its fixed-line broadband business is under a subsidiary, You Broadband, that it acquired from TRG Capital for ₹400 crore in 2017. The telco tried selling the fibre assets and data centre business in 2019, but talks fell through due to valuation differences.
In a call with investors, Vodafone Idea’s top management reiterated that the introduction of a floor price will work as the “best and most preferred” solution for weeding out the industry’s concerns stemming from the current low-tariff regime that started after Reliance Jio entered the industry with cut-price voice and internet data plans to attract subscribers.
Vodafone Idea has also approached the government, seeking an extension of a moratorium on spectrum instalments and to make it feasible for the company to raise tariffs so that that at least three large players survive in the telecom space for the benefit of the customers.
Speaking at an analyst call post its March quarter earnings, Ravinder Takkar, chief executive of Vodafone Idea, said, “On fundraising, we are currently in active discussion with potential investors.”
Vodafone has recently expressed its inability to pay the department of telecom the instalment of ₹8,292 crore that is due on April 9 2022 since the company’s cash will be used for payment of AGR dues.
In a June 25 letter to telecom secretary Anshu Prakash, the company requested a year of moratorium to pay the spectrum instalment currently scheduled for April 2022.
Vodafone Idea told DoT that many investors are not willing to put in money because they believe that unless there is a significant improvement in consumer tariffs, it will lead to loss on their investments.
The company has reported a consolidated loss of around ₹7,023 crore for the quarter ended March 31.