Vodafone Idea has concluded a mega $3.6 billion deal with Nokia, Ericsson, and Samsung to supply network equipment over three years. This marks the first step towards the rollout of the company’s three-year capex plan of $6.6 billion, which is directed towards expanding the 4G population coverage from 1.03 billion to 1.2 billion, launching 5G in key markets and expanding capacity in line with data growth.
Akshaya Moondra, CEO of Vodafone Idea Limited, said, “We are committed to investing in emerging network technologies to provide a best-in-class experience to our customers. We have kicked off the investment cycle.”
“We are on our journey of VIL 2.0 and from hereon, VIL will stage a smart turnaround to effectively participate in the industry growth opportunities. Nokia and Ericsson have been our partners since our inception and this marks another milestone in that continuing partnership. We are pleased to start our new partnership with Samsung. We look forward to work closely with all our partners as we move into the 5G era,” he added.
Big win for Nokia and Ericsson
The company has continued with its existing long-term partners, Nokia and Ericsson. It has also onboarded Samsung as a new partner, having trialled the latter’s vRAN technology with telecom operators in various circles.
In June, the board cleared the issue of preferential shares worth Rs 1,520 crore to Nokia Solutions and Rs 938 crore to Ericsson India. This amounts to Rs 2,458 crore, with shares issued at Rs 14.8 apiece.
Since April, Vodafone Idea placed hardware and software network upgrade orders with Nokia and Ericsson in critical circles.
European vendors Nokia and Ericsson, which have reported a steep decline in sales since the last quarter of the 2023 calendar year due to lower 5G spending, will also feel relieved with these substantial contracts from Vodafone Idea.
A source familiar with the matter said that Nokia had secured over 50 percent of the deal in terms of volumes, while Ericsson will have around 40 percent share. “Samsung remains in single digits in this deal since they are a new vendor,” the person said.
Another person said that European vendors also managed to win new business in telecom circles where Huawei and ZTE deployed 4G equipment. “There are six circles with deployment from Huawei and ZTE,” he said.
The latest deal with Vodafone Idea also relieves Samsung to an extent, which is trying to expand its presence with telecom operators in the country. Samsung had previously secured a small business from Bharti Airtel. While Samsung was the sole 4G gear vendor to Reliance Jio, the company chose Nokia and Ericsson for its 5G network rollout in the country.
No OpenRAN?
Notably, Vodafone Idea also considered using US-based Mavenir’s OpenRAN-based 4G and 5G equipment and even tested the technology in some areas. However, it ultimately chose not to make a commercial deal with Mavenir because it believed that the OpenRAN technology was not as advanced as traditional vendors like Nokia and Ericsson.
A third source stated that Vodafone Idea had been in advanced discussions with Mavenir but ultimately decided not to award them any commercial business.
The Vodafone Idea 4G expansion and 5G rollout contracts are structured similarly to Bharti Airtel’s 5G contract, with all three multinational gear vendors winning business in a similar ratio.
These new contracts with Nokia, Ericsson, and Samsung will allow struggling telco to quickly capitalize on the latest equipment to offer an enhanced customer experience, which will help reduce customer churn.
Vodafone Idea said the learnings and insights obtained by the vendors in the Indian market over the last two years will enable the company to embark on a more flexible and modular rollout plan by customising the services for all advanced technologies (4G & 5G).
The new equipment will also lead to energy efficiency gains and, thus, lower operating costs. Supplies against these new long-term awards will start in the coming quarter. The company’s top priority is to expand 4G coverage to 1.2 billion Indians.
The Capex is currently being funded out of the equity raise. For the long-term, capex 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 telco, which has 200 million subscribers, has contacted new lenders, including public sector non-banking financial companies (NBFCs).
“One of the major steps in this process was the completion of a techno-economic evaluation of the company’s long-term projections by an independent third party, which was recently completed. The report has been submitted to all the banks and financial institutions. Basis this report the banks will now progress with their internal evaluation and approval processes,” the telco said in a statement.
Vodafone Idea’s net debt was $28 billion until the first quarter of 2024-25, including an AGR liability of $8.5 billion. Twenty percent of this debt is principal, and the rest is interest and penalties.