A opportunity investment by Google into funds-strapped Vodafone Strategy (VIL), if materialises, will be a strategic optimistic for the Indian telecom operator, but a five per cent stake would still be inadequate to address the telcos’ financial debt problems, analysts stated on Friday.
Acquisition of a managing stake by an outsider or a sizable equity infusion by existing promoters stays the require of the hour, Credit score Suisse stated in its most recent observe.
Alphabet Inc’s Google is stated to be eyeing about 5 per cent stake in VIL, the Monetary Periods had reported on Thursday. Such an investment in VIL will pit the research large from Facebook which has picked up a stake in Jio Platforms, the agency that houses India’s youngest but greatest telecom enterprise – Reliance Jio.
Google investment into VIL can be incrementally optimistic, but a 5 per cent stake is not likely to move the needle or present any significant reduction to VIL’s financial debt problems, stated Credit score Suisse.
“We feel unless Google (or any other external trader) seems to be at attaining a managing stake in VIL, the chances of firm’s extended time period survival beyond FY23 (when the moratorium on deferred spectrum financial debt finishes) seems to be small,” it stated.
Goldman Sachs stated that at Vodafone Idea’s existing sector cap, a 5 per cent stake would be valued at USD 100 million or a lot less than one per cent of the firm’s USD fourteen billion-superb net financial debt as of December 2019.
“Nevertheless, we believe that any these kinds of investment from a world-wide tech enterprise these kinds of as Google could likely make it easier for VIL to increase money in the long run…,” it stated.
The modified gross earnings (AGR) circumstance still stays unsure, and could likely insert as significantly as 50 per cent to Vodafone Idea’s present net financial debt of USD fourteen billion. In these kinds of a situation, the telcos’ ability to create trader curiosity is unclear, unless there is full transparency on its regulatory liabilities, it additional.
The present higher balance sheet leverage indicates VIL would require at least USD 10 billion of incremental money for net-financial debt-to-EBITDA (earnings ahead of curiosity tax depreciation and amortisation) to fall to a degree that is in line with world-wide telco peers, in the coming decades, it observed.
A much better balance sheet could assistance Vodafone Strategy arrest its sector share decrease in the wireless sector, likely cutting down overhang on tower shares way too, the Goldman Sachs observe stated.
“At this time, there is no proposal as reported by the media that is being thought of at the Board,” stated Vodafone Strategy in a assertion to exchanges.