Cash-strapped Vodafone Idea (Vi) stands to benefit from a global downturn in demand for 5G network equipment, a trend that has affected companies like Nokia and Ericsson, even in India. Despite Vi’s financial challenges, global network equipment providers are inclined to collaborate with Vi due to its substantial user base of over 200 million subscribers. Vi urgently needs to expand its 4G network capacity and initiate 5G rollouts to stay competitive against larger competitors like Reliance Jio and Bharti Airtel.
Industry experts suggest that as Reliance Jio and Bharti Airtel are expected to reduce capital expenditure in FY25 after completing their nationwide 5G rollouts, network vendors would welcome fresh 5G contracts from Vi, preferably on a cash-and-carry basis. Analysts believe that Vi’s vendors, including tower companies and network equipment suppliers, would be open to doing business with Vi if the company successfully concludes its targeted ₹45,000 crore fundraising by the June quarter. However, vendors are likely to prefer cash transactions over credit deals due to Vi’s substantial backlog of dues.
Despite Vi’s pending dues, tower companies and equipment suppliers appear eager to engage with Vi, considering the sluggish global market conditions where growth opportunities, especially in markets like India, are valuable. Nokia Corp and Ericsson have experienced significant drops in sales in India, with Nokia citing normalisation of telco investments and revenue challenges for 2024. Airtel’s managing director also acknowledged the lack of meaningful monetization in the telco’s 5G business.
Analysts note that both Airtel and Jio have emphasized the limited use cases for 5G, primarily focusing on improving video streaming quality. Therefore, the expansion of use cases is crucial for accelerating the adoption of 5G services. In light of these factors, global network vendors are likely to seek cash deals with Vi, although they may request upfront payments of pending dues before signing new 4G/5G contracts. Vi’s principal network gear vendors include Nokia, Ericsson, and Huawei, with Indus Towers and ATC India providing tower infrastructure services. Vi plans to utilize the proceeds from its fundraising to expand 4G capacity and launch 5G networks.
