According to sources familiar with the subject, Vodafone Plc’s ailing India unit is in negotiations with the country’s largest lender about new loans, in a move that may pave the way for other banks to give credit and boost the cash-strapped wireless operator’s survival chances.
According to sources involved with the negotiations who asked not to be identified since the conversations are confidential, the State Bank of India has asked Vodafone Idea Ltd., a joint venture between Vodafone and billionaire Kumar Mangalam Birla’s conglomerate, to first devise a turnaround strategy.
According to persons familiar with the matter, the government-owned lender has requested that Vodafone Idea produce a thorough strategy on their financial viability, including stock infusion from the top shareholders, cash conservation strategies, pricing forecast, and a road map to return to profits. According to the sources, the mobile phone company is preparing this information for the lender. The talks are still ongoing, and there is no guarantee that the company will receive this cash.
An email sent to the State Bank of India seeking comment was not returned. Vodafone Idea declined to comment ahead of its quarterly results announcement on Friday.
If the bank loan is approved, it will be a lifeline for the company, which hasn’t made a profit since Mukesh Ambani’s Reliance Jio Infocomm Ltd. launched a pricing war in 2016 and has been losing subscribers to larger competitors in the last year. After India issued a series of policy relief measures in September, which helped Vodafone Idea avoid insolvency, banks have grown more lenient toward the underperforming wireless provider.
Vodafone Idea’s overall debt as of June 30 was 1.9 trillion rupees ($26 billion), according to a Sept. 15 report from brokerage JM Financial, with 1.68 trillion rupees payable to the government and the remaining 234 billion rupees outstanding to lenders.