Vodafone Idea's fundraising plans, if it materialises in the coming months, could unlock new revenue opportunities for multinational telecom gear vendors such as Nokia and Ericsson, which saw their India sales decline in the October-December quarter. The multinational vendors expect a weaker 2024 in the absence of substantial new business from Airtel and Reliance Jio, the country's top two telecom operators.
Analysts said that the third-ranked telecom operator is currently experiencing a cash crunch and hasn't had much capex in the last few years. Once it secures funding, Vodafone Idea will focus largely on 4G expansion and begin a 5G rollout in priority circles.
“This will present a good opportunity for the vendors, including Nokia, Ericsson and Samsung, to get contracts at a time when fresh deals with Airtel and Jio will be limited,” Ashwinder Sethi, principal at Analysys Mason, told Moneycontrol.
Sethi said Vodafone Idea's immediate focus will be to enhance customer experience through network capacity and coverage expansion, which will help it reduce customer churn. “Vodafone Idea is already lagging by about 1.5 years vis-a-vis the top two telcos.”
Vodafone Idea, which has more than 200 million subscribers, currently works with Nokia, Ericsson, Huawei and ZTE for its 4G network.
READ MORE: Govt taken all possible measures to support Vi, back fundraising plan: Ashwini Vaishnaw
Nokia powers Vodafone Idea’s 4G in nine circles, while Ericsson does so in eight circles. Chinese companies Huawei and ZTE power the telco’s 4G in seven and five circles, respectively.
Shiv Putcha, founder and principal analyst at Mandala Insights, said that Vodafone Idea will have to invest in 4G capacity to stop churn and get service revenues, which will help them pay dues. “They will use funds for 4G mostly instead of 5G and rather focus on 5G in certain priority circles. This will kick start the capex cycle for them.”
Nokia suffered a 33 percent sequential fall in India sales, while Ericsson suffered a 40 percent decline in sales in the October-December quarter due to Reliance Jio and Bharti Airtel's capex reduction. The two vendors are now awaiting fresh 4G and 5G contracts from Vodafone Idea.
Nunzio Mirtillo, the outgoing head of Market Area South East Asia, Oceania, and India at Ericsson, said that Vodafone Idea’s plans to raise Rs 45,000 crore in debt and equity is a “positive” sign for the industry and vendor partners. “Vodafone Idea is still waiting to invest…A three-telecommunication operator structure makes much sense in India and is a viable solution. India is a significant market with a huge subscriber base.”
Nokia executives echoed rival Ericsson's views. They believe Vodafone Idea getting its finances in place would be good for the overall market and hope to secure new business by having the largest presence in Vodafone Idea’s network.
Responding to a question on Vodafone Idea’s position in India’s 5G space, Nishant Batra, Nokia's chief strategy officer, told Moneycontrol last month, "If there is more offering, it is always good for consumers.”
However, experts suggest that existing vendors such as Nokia and Ericsson may insist on cash transactions rather than credit deals with the telecom operator, considering its substantial backlog of dues.
Mavenir eyeing opportunity
Neil Shah, vice president of Counterpoint Research, separately told Moneycontrol that Vodafone Idea has a network of more than 250,000 base stations. This opens up a significant opportunity for infrastructure vendors to target an already tight business position in the telecom equipment market.
“We could see a mix of OpenRAN and traditional players likely to benefit from this upgrade. Mavenir and Samsung will look to cash in, and the timing is also perfect and a great “at scale” case study—if they are successful in winning even 25 percent of the new orders and with deployments,” Shah said.
Putcha mentioned that in circles where Vodafone Idea has Nokia and Ericsson, they will proceed with them for expansion. "For other circles, particularly non-metro markets, the telco may utilize Mavenir as there are no significant traffic issues. Additionally, Samsung could also secure some business."
However, Analysys Mason’s Sethi believes that Vodafone Idea may be cautious about awarding meaningful business to Mavenir. “While Vodafone Idea may be open to evaluating and giving business to Samsung, Mavenir may struggle as OpenRAN take-up and deployments are limited not just in India but worldwide,” he said.
US-based OpenRAN gear maker Mavenir expects to secure a significant commercial 5G contract from Vodafone Idea once the latter receives funding later this year, Moneycontrol reported on March 15.
“Our expectation is to get the contract [once Vodafone Idea secures funding]...we are positive and see an opportunity for Mavenir when Vodafone Idea starts to invest in the network,” Sanjay Bakaya, Mavenir's country head for India, told Moneycontrol last month.
READ MORE: Mavenir expects commercial OpenRAN 5G business from Vodafone Idea later this year
OpenRAN, as a concept, enables hardware and software to be disaggregated, unlike conventional radio gear. This allows technology products from different suppliers to coexist with the various software providers.
The technology is compatible with 2G, 3G, 4G, and 5G services and allows more customisation of the network architecture and capabilities, creating opportunities for new business lines and improving customer experience, analysts said.
Vodafone Idea is working with Mavenir for the commercial phase of the Open RAN network pilot deployment, which started in September 2023. The telco is also piloting vRAN, or virtualized RAN technology, from Korea’s Samsung in the Tamil Nadu circle.
As reported by Moneycontrol, Vodafone Idea is looking to raise Rs 45,000 crore in equity and debt, having secured equity commitments from anchor investors exceeding $1 billion (Rs 8,200 crore).
ALSO READ: Have commitments from anchor investors for $1 billion in equity, Voda-Idea tells banks
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