Vodafone Group in talks with Airtel to sell upto 5% stake; proceeds of which to be used in Vodafone Idea

Vodafone Group PLC is in talks to sell up to 5% stake in tower firm Indus Towers to Bharti Airtel, and use the proceeds to plough into Vodafone Idea, as the deadline to raise funds from external investors draws near. “The 2 sides are in discussions and things could move very fast very soon”, and Executive told ET. Indus Towers closed 0.4% lower at Rs 251.20 at BSE. A 5% stake could fetch Vodafone over Rs 3, 300 crores.

Vodafone Idea closed 1.6% lower at Rs 10.72 while Airtel is up 0.6% at Rs 704.25 on Wednesday. Incidentally, Airtel has recently announced that it would raise Rs 7500 crore via debt in 1 or 2 tranches. It is expected to raise up to Rs 5000 crore shortly through rupee-dominated bonds, ET stated. Market analysts are surprised as the telco recently tied up with Google.

Fund infusion by Vodafone Idea promoters is key to the cash-strapped telco raising funds from external investors. ABG Chairman, Kumar Mangalam Birla is also expected to invest around $200 million of its own into Vodafone Idea. Analysts believe that Vodafone Idea needs an immediate cash infusion to build on the gains of the recent tariff hikes to compete with its rivals and at the same time arrest subscriber losses to its rivals Reliance Jio and Bharti Airtel and subsequently revive its business.

With over 184,748 towers and 335,106 co-locations, Indus posted a net profit of Rs 1571 crore in December, up to 16% on year with telcos adding more locations to tap strong data demand amid a continuing pandemic. With the demand for leaner towers, the growth model for tower companies can significantly change in the future. “The possibility of these towers is better than macro towers and will have a returns profile similar to normal towers”, equity research firm Edelweiss stated in an internal note.