Vodafone Idea’s Rs 25,000 cr rights issue gets Cabinet approval

The Cabinet on Thursday approved a foreign direct investment (FDI) proposal of Vodafone Idea for over Rs 5,000 crore and up to Rs 25,000 crore by way of a rights issue.
A Cabinet note was circulated a few weeks back on the FDI proposal linked to the proposed rights issue of the company.
The approval was announced by finance minister Arun Jaitley after the Cabinet meeting.

Last month, the Board of directors of Vodafone Idea had approved Rs 25,000 crore fundraising plan by way of a rights issue to existing eligible equity shareholders.
UK’s Vodafone Group and Aditya Birla Group, the promoters, had already said they intend to contribute up to Rs 11,000 crore and up to Rs 7,250 crore, respectively as part of such rights issue.
Vodafone holds a 45.1 stake in the combined entity, while Kumar Mangalam Birla-led Aditya Birla Group controls 26% and Idea shareholders own 28.9%.
Vodafone India and Idea Cellular have merged after the intense competition triggered by entry of Reliance Jio. The merger of Vodafone India and Idea Cellular got operational in August last year.
After the entry of Reliance Jio in the telecom sector in late 2016, a consolidation spree in the industry happened where Vodafone and Idea announced their merger to create the largest telecom player displacing Airtel from its top position.
Vodafone Idea has chalked out a three-pronged strategy for consolidating the two networks. First, to make dominant network better in each circle as the anchor network. Secondly, complement the anchor network with required support from the other network. Subsequently, the plan is to enhance network capabilities and capacity with the introduction of new technologies such as dynamic spectrum refarming (DSR), spectrum refarming, massive MIMO and small cells.

Continuous investment in networks has become difficult for for Vodafone Idea, which is still in the process of integrating the two networks. The rights issue will enable the company to invest in expansion of 4G networks as it takes on Mukesh Ambani’s Reliance Jio and Sunil Mittal’s Airtel in the data hungry market.