Vodafone Idea was on the verge of drowning, Once popular stockIt has reported huge piles of losses and has huge amounts to pay in AGR dues.
But what has suddenly changed that drove its share price up?
Did Vodafone Idea find a ray of hope in the midst of a deep black ocean of debt?
Read on to find out…
A ray of hope for Vodafone Idea
Vodafone Idea’s share price started rising after it was reported that Amazon would invest in Vodafone Idea.
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Ken reported on 30 May 2022 that Amazon plans to invest 200 billion in Vodafone Idea. Amazon will invest 100 billion as equity and half in debt.
This will increase the debt of Vodafone Idea significantly. Because Vodafone Idea will probably get 100 billion as a long-term payable.
Higher the post-investment debt 2,000 billion This may increase the concern of investors.
However, an increase in debt does not necessarily mean a major risk as 90% of the total debt is due to the government.
All telecom companies have huge debt due to AGR dues. So debt levels may rise, but it may not be a cautionary tale.
Apart from Amazon, other private equity investors can also invest in Vodafone Idea.
The proceeds from the investment will be used to bid for the auction of 5G spectrum and meet capital expenditure for providing 5G services.
This potential investment will be a win-win for both the parties.
win for amazon
For some time now, Amazon has been looking to invest in a telecom company in India. It is the only major cloud service in India with no telecom partner.
In two to three years, major cloud service providers like Facebook, Microsoft and Google have partnered with Reliance Jio Infocomm and Bharti Airtel.
Hence, this investment is a much needed step for Amazon to strengthen its cloud services in India.
Vodafone Idea is the third largest telecom company by subscriber base and the second largest telecom company by market cap. These are really attractive features to partner with for a company.
Also, Amazon can count on the company to work hard to make the most of the money it has invested as promoters have recently made a major investment in the company.
Aditya Birla Group and Vodafone Plc invest 450 billion in Vodafone Idea through an issue of preferential equity.
Out of this Vodafone plc, contributed 337.5 billion, and 112.5 billion was contributed by the Aditya Birla Group.
win for vodafone idea
Vodafone Idea was looking for investors for a long time. For almost three years Vodafone Idea has been trying to raise funds to cover its AGR dues and be able to invest in 5G spectrum.
Vodafone Idea has conducted successful trials in Gandhinagar and Pune for the development of 5G services. Money was desperately needed to develop these services.
According to the last financial results of Vodafone Idea, the company has increased by one million subscribers and its profit has increased by 22%.
This is a massive increase in subscribers as before this period, the company was losing an average of 1.9 million customers every month.
So the company is reviving its business. The only thing Vodafone Idea lacked to be able to give tough competition to its peers Airtel and Jio was an investment.
Thus, the investment from Amazon is the ray of hope that Vodafone Idea desperately needs.
It still remains to be seen whether it will be able to compete with the likes of Vodafone. 5g stock in india.
What will be the impact of this deal on investors?
The share price of Vodafone Idea has been trading at a very low price for a long time. Hence, it has become quite unattractive for investors.
But, if Vodafone Idea manages to secure this investment from Amazon, the scenario could change.
Due to improving financials and successful 5G trials, the company has shown that it is fundamentally strong.
On top of this, if the company wins the 5G spectrum auction, then the share price of Vodafone Idea can increase rapidly.
But it’s all in the feasibility stage right now.
We cannot ignore the fact that even if Amazon invests in Vodafone Idea, its debt level is going to increase significantly.
It may not even participate in the auction and the 5G service plan may not be as per the plan.
So news can work on both sides. Stay tuned to the platform to know what happens with the “Vodafone Idea Amazon investment” story.
About Vodafone Idea
Vodafone Idea is a partnership between Aditya Birla Group and Vodafone Group. It is one of the leading telecom service provider in India.
The company provides voice and data services across India in 2G, 3G and 4G.
For more information about the company, you can visit here Factsheet of Vodafone Idea.
Happy investment!
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
This article is syndicated from equitymaster.com