New Delhi: The Rs18,000-crore follow-on public offer (FPO) should improve Vodafone Idea’s (VIL) near-term fortunes and help arrest some subscriber losses, but clawing back meaningful market share gains from larger peers may still prove to be tough, according to a report by Kotak Institutional Equities on Monday.
Terming the FPO as a step in the right direction although much delayed, Kotak Institutional Equities in a note said the capital raise should help it bridge the network coverage gap, and improve competitiveness versus peers to some extent. Further, with a sharp reduction in VIL’s bank debt, the operator should be able to secure further funding from banks. “While the fund-raise should improve Vi’s (VIL’s) near-term fortunes, we don’t expect Vi to gain any meaningful market share from peers and remain concerned about potential large equity dilution (on the conversion of Government dues).
Potentially, the government could own an 80 per cent plus stake in Vi on a fully diluted basis in the worst case, which would limit any meaningful upside for Vi’s minority investors,” the report said. Utilising the FPO proceeds for boosting 4G coverage will help arrest market share losses in the near term, but wresting back the market share from larger peers would remain “a tall ask”. VIL lost about 19 per cent market share since the merger due to its inadequate network spends, it observed.
