Vodafone Idea's new loan won't end its financial woes

India's Vodafone Idea has received a two-year loan of 20 billion Indian rupees ($240 million) from HDFC Bank, according to media reports. The amount was disbursed in September and was used by the telco to meet its license fees and spectrum usage charges (SUC). 

The loan from HDFC Bank provides temporary relief for Vodafone Idea, which has struggled to acquire funding. The service provider has a massive debt of INR2.12 trillion ($25.56 billion) and reported a net loss of INR87.4 billion ($1.05 billion) in the quarter ending September 2023, up from INR78.4 billion ($942 million) in the first quarter of the year. 

It has been trying to find an investor for several years. Earlier in 2023, the Indian government converted interest on Adjusted Gross Revenue (AGR) dues to emerge as its largest shareholder with a 33.3% stake. 

The promoters, Vodafone Group and Aditya Birla Group, had earlier promised to inject INR20 billion ($240 million) into the operator. This could now come with funding support from external investors, after the company's CEO recently said Vodafone Idea expects to raise those funds by the end of the year, according to reports. Vodafone Idea needs cash to build 5G networks and boost its 4G coverage.

Another significant development is Vodafone Idea and Bharti Airtel hiving off their stake in the joint venture FireFly. The UK-based Digital Infrastructure Accelerator (DIA) and a Middle Eastern fund are purchasing a 100% stake in the company, which provides Wi-Fi infrastructure. FireFly had been looking for an investor several years after both Airtel and Vodafone Idea said they would not invest more funds in the joint venture.

Its massive debt has prevented Vodafone Idea from making investments to improve network performance or launch 5G. Bharti Airtel and Reliance Jio, India's biggest telco, launched commercial 5G services last year. As 5G coverage is extended, Vodafone Idea becomes more vulnerable to losing customers. 

It has been trying to come up with new products to stem those losses. Efforts include piloting a converged offer called Vi One in 12 cities, in association with You Broadband. Vi One combines mobile, fixed broadband and content services for prepaid subscribers. It is due to be extended to other areas soon.

Vodafone Idea is certainly trying to counter a barrage of media reports about its financial health with updates about new initiatives. It partnered with Deloitte India to demonstrate two Virtual Reality (VR) use cases at the recently concluded India Mobile Congress (IMC) 2023. It also announced the setting up of an Internet of Things lab-as-a-service in association with C-DoT for device testing and certification. 

As the year comes to an end, Vodafone Idea is nowhere near resolving its financial problems. It needs urgent funding, and the loan from HDFC Bank looks more of a stop-gap arrangement than the end of its troubles.