How Vodafone Idea plans to spend its Rs 18,000 cr FPO proceeds

The telco will spend Rs 5,720 crore of the Rs 12,750 crore earmarked for network expansion on setting up its 5G network.

India’s third largest telco, Vodafone Idea, plans to spend the Rs 18,000 crore capital to be raised from its follow-on public offering (FPO) to set up new 5G sites, expand its 4G network and for deferred payments for spectrum, the telco said in its red herring prospectus (RHP) filed on Friday.

The Vodafone Idea FPO will open for subscription on April 18 and close on April 22. The company has fixed a price band of Rs 10-11 per share for the FPO. Minimum bid lot for subscription has been fixed at 1,298 equity shares.

Moneycontrol first reported on April 10 that the Vodafone Idea FPO will open by mid next week. 

Network expansion spends

Of the total FPO proceeds, the telco proposes to use Rs 12,750 crore for purchase of equipment for the expansion of its network infrastructure by setting up new 4G sites;  expanding the capacity of existing 4G sites and for setting up new 5G sites, as per the RHP.

Of this, Rs 6,620 crore is planned to be spent in FY25 and Rs 6,130 in FY26.

“As of December 31, 2023, we have an aggregate of 8,005.2 MHz of spectrum holdings across different frequency bands, of which 7,975.2 MHz spectrum is liberalised and can be used towards deployment of any technology, including 4G and 5G technology. This includes the mid-band 5G spectrum (3,300 MHz band) in 17 priority service areas and mmWave 5G spectrum (26 GHz band) in 16 service areas,” the telco said.

The telco has deployed 4G technology through 3,79,815 existing 4G sites, as of December 31, 2023.

“We have set up and upgraded the capacity of 1,00, 355 4G sites over the nine months ended December 31, 2023, and fiscals 2023, 2022 and 2021, and have incurred a total capital expenditure of Rs 5,285.7 crore, in this respect,” it added.

5G capex

The telco will spend Rs 5,720 crore of the Rs 12,750 crore earmarked for network expansion on setting up its 5G network.

In FY25, it plans to set up 10,000 new 5G sites with a spend of Rs 2,600 crore, and in FY 26, it will set up 12,000 5G sites with a spend of Rs 3,120 crore.

Deferred spectrum payments

Vodafone Idea plans to utilise Rs 2,175.31 crore from the FPO proceeds for deferred payments for spectrum to the Department of Telecom and the GST.

Of this Rs 2,145.88 crore will be spent in FY25.

The telco had opted to pay for the spectrum it acquired in the 2021 and 2022 auctions in equal instalments for a period of 20 years. It has to pay Rs 2,175.31 crore annually, including GST payments.

General corporate purposes

The rest of the FPO proceeds will be used by the company towards various general corporate purposes such as funding working capital requirements; strengthening marketing capabilities and brand-building exercises;  strategic initiatives, inorganic acquisitions, partnerships and joint ventures;  investment in its subsidiaries and associate companies;  meeting exigencies which the company may face in the ordinary course of business; and for meeting payment obligations including payment of liabilities or remaining debt obligations.