Vodafone Idea seals $3.6-bn network deal. What does it mean for users and vendors?

Vodafone Idea

The $3.6-billion funding deal Vodafone Idea (Vi) announced on September 22 is expected to have significant implications across the country's telecom ecosystem. The deal is likely to revitalise the beleaguered telco and enhance its network infrastructure, fuelling hopes for various stakeholders, including equipment vendors and subscribers.

On subscribers

Vodafone Idea's 200-million-plus subscribers are eagerly awaiting better network quality and services. The $3.6-billion deal is likely to make a noticeable difference for the users. Supplies against these new long-term awards will start in the coming quarter. With the deployment of advanced equipment, the subscribers may expect better network quality, reduced call drops, and accelerated data speed. The upgraded infrastructure will also enhance the overall connectivity.

Vodafone Idea’s plan to widen its 4G coverage from 1.03 billion to 1.2 billion means more subscribers will have access to high-speed internet services and rural areas will see significant improvement in coverage.

The telco is investing in capacity expansion to handle the growing demand for data more efficiently. The funding will help the subscribers experience stable services even during peak usage times.

The deal sets the groundwork for rolling out the Vodafone Idea 5G services. Once 5G becomes available, the users can expect faster speed, lower latency, and newer applications. Adoption of modern equipment may help save energy, indirectly benefiting the subscribers by ensuring a more sustainable network.

The cash-strapped telecom service provider has been battling with subscriber exodus for some time, causing severe dent to its competitive edge. The company’s network quality has been a major factor contributing to the outflow. With improved network infrastructure and better service quality, Vodafone Idea hopes to stem the subscriber churn and boost its user retention rate.

Vodafone Idea has seen growth in its 4G subscriber base. Better network quality will also boost 4G adoption and help retain the users.

On equipment vendors

European telecom equipment vendors Nokia and Ericsson will see some relief on potential contracts from Vodafone Idea. The country's top two gear makers are working with all three telcos for their 4G and 5G networks but they have reported a steep decline in sales since the last quarter of 2023 as the service providers slashed spending on 5G. The Vodafone Idea funding deal is expected to help Nokia and Ericsson jack up their toplines.

Korean chaebol Samsung too stands to gain from the Vodafone deal as it tries to expand its presence with telecom operators in the country. Samsung had previously secured a small business from Bharti Airtel. While it was the sole 4G gear vendor to Reliance Jio, the Mukesh Ambani-led telco opted for Nokia and Ericsson while rolling out its 5G network.

"The network equipment deal includes radios for 5G rollout and 4G swap in circles currently serviced by Chinese vendors. This will help Vi to offer 5G and thus compete better with Jio and Airtel, which have already upgraded around 50 percent of their sites to 5G and have further aggressive plans for the 5G rollout for the next year or so. The 4G swap is expected to be led by Samsung in circles currently serviced by Huawei and ZTE, such as Karnataka and Punjab," Ashwinder Sethi, partner at Analysys Mason, told Moneycontrol.

Vodafone Idea, which has been struggling with financial liabilities, including unpaid bills to vendors like Nokia and Ericsson, is in the advanced stage of discussions with its existing and new lenders to tie up Rs 25,000 crore of funded and Rs 10,000 crore of non-fund-based facilities.

The debt funding will also help the telco execute its Rs 50,000-55,000-crore capex plan, resulting in better prospects for Nokia, Ericsson and Samsung. The debt funding is also likely to translate into significant investments in upgrading Vodafone Idea's 4G infrastructure and pave the way for reollng out 5G services. This will mean more contracts and orders for equipment vendors to help build the network.

Analysts said the upcoming financial boost will reassure the vendors about Vodafone Idea’s stability and encourage future partnerships for upcoming projects.