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Vodafone Idea, a struggling Indian telecommunications company, has entered into a significant $3.6 billion agreement with Nokia, Ericsson, and Samsung to supply network equipment over the next three years. This deal represents the first step in Vodafone Idea's ambitious three-year capital expenditure (capex) plan of $6.6 billion, aimed at expanding its 4G network coverage, launching 5G services in key markets, and increasing capacity to meet growing data demands. The company aims to increase its 4G coverage from 1.03 billion to 1.2 billion people.
Akshaya Moondra, CEO of Vodafone Idea, highlighted the company's commitment to investing in advanced network technologies to deliver an exceptional customer experience. The deal marks a continuation of Vodafone Idea's long-standing partnerships with Nokia and Ericsson, while also incorporating Samsung as a new partner. The company previously conducted trials of Samsung's vRAN technology with other telecom operators.
The agreement is a major win for Nokia and Ericsson, who have experienced a decline in sales due to lower 5G spending in recent quarters. Sources reveal that Nokia secured over 50% of the deal in terms of volume, while Ericsson holds approximately 40%. Samsung's share is comparatively smaller, reflecting its new vendor status. Notably, the European vendors also secured new business in telecom circles where Huawei and ZTE had previously deployed 4G equipment.
Samsung's involvement in the deal reflects the company's efforts to expand its presence in the Indian telecom market. While Samsung was the sole 4G gear vendor to Reliance Jio, it opted for Nokia and Ericsson for its 5G network rollout. This latest contract with Vodafone Idea offers Samsung an opportunity to solidify its position in the country's telecommunications sector.
Interestingly, Vodafone Idea initially considered employing OpenRAN technology, particularly Mavenir's 4G and 5G equipment, and even conducted trials. However, the company ultimately decided against a commercial deal with Mavenir, citing concerns regarding the maturity of OpenRAN technology compared to traditional vendors like Nokia and Ericsson. The Vodafone Idea 4G expansion and 5G rollout contracts share similarities with Bharti Airtel's 5G agreement, with all three multinational gear vendors securing business in a similar ratio.
The new contracts with Nokia, Ericsson, and Samsung are expected to enable Vodafone Idea to quickly leverage the latest equipment to enhance customer experience and reduce churn. The company will benefit from the vendors' learnings and insights from the Indian market, allowing for a more flexible and modular rollout plan. The new equipment is also anticipated to lead to energy efficiency gains and lower operating costs.
Vodafone Idea plans to prioritize expanding 4G coverage to 1.2 billion Indians. The capex for this project is being financed through an equity raise. The company is also in advanced discussions with existing and new lenders to secure Rs 25,000 crore in funded facilities and Rs 10,000 crore in non-fund-based facilities. Vodafone Idea has reached out to new lenders, including public sector non-banking financial companies (NBFCs). The telco has recently completed a techno-economic evaluation of its long-term projections by an independent third party, which has been submitted to all banks and financial institutions for their internal evaluation and approval processes.
Vodafone Idea's net debt stood at $28 billion as of the first quarter of 2024-25, including an AGR (Adjusted Gross Revenue) liability of $8.5 billion. The majority of this debt comprises interest and penalties, with only 20% representing principal.
Source: Vodafone Idea inks $3.6 bn 4G network expansion, 5G rollout deal with Nokia, Ericsson, Samsung