Why Vodafone Idea is Optimistic For 5G Network Gear?

By Consultants Review Team Friday, 08 March 2024

Financially constrained Vodafone Idea (Vi) is expected to benefit from a decline in 5G network equipment demand that has hurt recent profits at firms like Nokia and Ericsson and is occurring internationally, including in India.

Global network equipment vendors are likely to prefer working with Vi despite the Indian telecom operator's precarious financial situation. Vi still has more than 200 million users, but in order to effectively compete with larger rivals Reliance Jio and Bharti Airtel, it needs to urgently expand 4G network capacity and also start 5G rollouts.

Experts in the industry concur that Vi's suppliers, including as network equipment providers and tower firms, would be open to doing business with the telecom in the event that it completes its intended ₹45,000 crore fundraising by the end of June. But given the telco's enormous backlog of unpaid bills, they also think Vi's vendors would insist on cash deals rather than credit transactions.

The CEO of Nokia Corp, Pekka Lundmark, recently pointed out revenue concerns for the Finnish gear maker in 2024 and ascribed the 33% sequential decline in India sales in Q4 2023 to the normalization of telecom expenditures. The CEO of Sweden's Ericsson, Borje Ekholm, also linked the phenomena to a quicker-than-anticipated decline in network capital expenditure investment by Indian telecoms. In Q42023, Ericsson's revenues in India fell by 40% sequentially.

According to Axis Capital, Jio and Airtel have both stated that higher-quality video streaming is the only use for 5G. Therefore, the brokerage believes that in order to spur more adoption of 5G services beyond the natural rise resulting from a subscriber replacing their device, use cases would need to be expanded.
Jio and Airtel together had a tiny base of 155 million pure 5G subscribers as of the end of December, and that was only after they had been selling 5G contracts at 4G pricing.

Analysts predict that given these conditions, international network providers will be eager to make cash agreements with Vi; but, they will probably insist on receiving payment in full ahead for part or all of its outstanding debts prior to agreeing to any new 4G/5G contracts. Vi's primary providers of network gear have been Nokia, Ericsson, and Huawei; its primary providers of tower infrastructure services have been Indus Towers and ATC India, which was recently bought by Brookfield in Canada. Vi said last month that it will utilize the money raised from its impending ₹45,000 crore fundraising to build its 4G coverage and introduce 5G networks.

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