MUMBAI -- Indian wireless carrier Vodafone Idea rebranded as "Vi" on Monday, looking to unify a company that has struggled against rivals Bharti Airtel and Reliance Jio Infocomm since its creation in a merger two years ago.
As part of the new brand identity, the company will focus on bolstering its fourth-generation network as well as preparing its entry into 5G.
The announcement came only three days after Vodafone Idea said it would raise up to $3.4 billion through a mix of equity and debt. In addition to the cost of network investments, the company faces a huge bill from the government for back dues.
"As the integration of the two businesses is now complete, it's time for a fresh start," Nick Read, CEO of U.K.-based parent Vodafone Group, said in a statement. "That's why we believe that now is the perfect time to launch 'Vi.'"
Vodafone Idea was formed in 2018 through a merger of the British telecom group's Indian arm and Idea Cellular, part of local conglomerate Aditya Birla Group.
"With 1.2 billion Indians accessing voice and data services at the world's lowest tariffs across 500,000 villages, the ubiquitous wireless network in India is unmatched for its reach and impact in people's lives," Kumar Mangalam Birla, chairman of Aditya Birla Group and Vodafone Idea, said in a statement Monday.
The rebranding follows an order by India's Supreme Court that directed telecoms including Bharti Airtel and Vodafone Idea to pay back dues to the government within 10 years. Vodafone Idea was hit hardest by the judgment, owing over 504 billion rupees ($6.9 billion) in spectrum use and other charges.
"This branding was long expected but delayed because of the looming uncertainty and indecisiveness in terms of the government policy and court decisions," said Sanchit Gogia, CEO of Greyhound Research. "Broadly, when something like this happens in a merger, it doesn't happen in isolation. The integration of people, processes and technology has been happening in the course of years. The indecisiveness is over."
Vodafone's board approved a proposal Friday to raise up to 150 billion rupees through a public or private securities offering. This could include equity, foreign-currency convertible bonds or other options. Up to 150 billion rupees of nonconvertible debentures also will be issued, though total fundraising will not exceed 250 billion rupees.
"Vodafone has made it very clear that they have indemnity of 1 billion euros ($1.18 billion) granted to Vodafone Idea, of which 200 million euros has already been paid," said Vivekananda S., an equity analyst with Ambit Capital. "Any strategic investors will get confidence from this and also from how the indemnity money is being used so that they can hold subscribers."
The indemnity mechanism is part of the shareholder agreement signed by Vodafone India and Idea Cellular when the companies merged in 2018, facing tough competition from Bharti Airtel and new player Reliance Jio. This disbursement will help tide Vodafone Idea through tough times, which have sunk it into negative net worth and driven net debt to 1.16 trillion rupees.
Vodafone Idea's business-to-business and business-to-consumer operations are both strong and may attract strategic investors such as Google and Amazon, Gogio said.
"What these companies gain to mine is the large subscriber base and a thriving B2B business," he said.
Ravinder Takkar, Vodafone Idea's CEO and managing director, spoke in favor of a mobile tariff hike during a virtual news conference, calling current rates "unsustainable."
"Consumers are ready to pay additional tariffs, which is something they were paying earlier, to keep the quality of service up," he said. "We believe tariffs have to go up at least in the short term."
Gogia reckons that a correction in average revenue per user is needed, and should happen through tariff hikes.
"That's a hard call that companies will have to take," he said.