Vodafone Idea to Raise Rs 2,458 Crore through Share Sale to Nokia and Ericsson

Vodafone Idea is set to raise Rs 2,458 crore through a share sale to Nokia and Ericsson to clear its outstanding dues, a regulatory filing said on Thursday.

Nokia will acquire a 1.5% stake in Vodafone Idea for Rs 1,520 crore. Ericsson will obtain a 0.9% stake for Rs 938 crore. The shares will be allocated on a preferential basis and come with a six-month lock-in period. This move will allow Vodafone Idea to clear part of their outstanding dues to these vendors.

The board of Vodafone Idea Ltd (VIL) has cleared allotment of shares on preferential basis at about 35 per cent higher price compared to the follow-on offer price of the company, and comes with a lock-in of 6 months.

The transaction is subject to approval by Vodafone Idea's shareholders at the Extraordinary General Meeting (EGM) scheduled for July 10, 2024. This strategic step is significant for Vodafone Idea as it continues to strengthen its financial position and network capabilities.

To recall, in April ATC Telecom Infrastructure Pvt Ltd sold its entire stake in Vodafone Idea. ATC Telecom sold a total of 144 crore shares, representing a 2.87% stake in Vodafone Idea. The shares were disposed of at an average price of Rs 12.78 apiece, resulting in a deal size of Rs 1,840.32 crore.

The stake acquisition in Vodafone Idea by Nokia and Ericsson is a strategic move that could have several impacts. Both companies are investing a significant amount of money, with Nokia acquiring a 1.5% stake for Rs 1,520 crore and Ericsson a 0.9% stake for Rs 938 crore. This investment could potentially yield financial returns if Vodafone Idea's stock price appreciates.

"Nokia and Ericsson both have a long-term partnership with VIL, as key suppliers of network equipment, and this preferential allotment will enable VIL to clear part of their outstanding dues," the filing by Vodafone Idea said.

By acquiring stakes in Vodafone Idea, Nokia and Ericsson are deepening their presence in the Indian telecom market, which is one of the largest in the world. This could enhance their influence and bargaining power in the industry.

The deal indicates a strengthening of the long-term partnership between Vodafone Idea and the two equipment vendors. It could lead to more collaboration on future projects, especially in areas like 5G technology and network expansion.

The transaction allows Vodafone Idea to clear part of their outstanding dues to Nokia and Ericsson, which could improve the financial health of the telecom operator and ensure the continuity of services from these vendors.

For Nokia and Ericsson, this move could be seen as a vote of confidence in Vodafone Idea's future, potentially adding value to their shareholders if the telecom operator's performance improves. The stakes could lead to operational synergies, allowing Nokia and Ericsson to integrate their technologies more closely with Vodafone Idea's network, potentially leading to improved network performance and customer experience.

Overall, the impact of this stake acquisition will depend on various factors, including the future performance of Vodafone Idea, market conditions, and the companies' ability to leverage this partnership to create value. It's a multifaceted decision with potential benefits and risks for both Nokia and Ericsson. 
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