Vodafone Idea Announces Demerger of Fibre Business

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The board of directors of Vodafone Idea has cleared the arrangement for transferring of fibre infrastructure undertaking to its fully-owned subsidiary – VTL

Vodafone Idea Ltd, the largest telecom operator in India, has informed the NSE that it has demerged its fibre infrastructure undertaking by transferring the assets to a wholly-owned subsidiary, Vodafone Towers Ltd (VTL).

This move indicates for an early selling of fibre assets of Vodafone Idea as the telecom market leader urgently requires to bring in funds to counter the severe competition from its counterparts – Bharti Airtel Reliance Jio.

The board of directors of the company has cleared the arrangement for transferring of fibre infrastructure undertaking to its fully-owned subsidiary VTL, Vodafone Idea said in a regulatory filing.

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The telecom major has around 1,56,000 km of fibre network assets across the country. The bulk of it is on inter-city routes that is utilised for backhaul capacity.

Plans to monetise business

In November, the company had announced plans to monetise its business of fibre assets, which is estimated to be worth around US$ 430-450 million. In addition, the telecom operator plans to raise an equity fund of Rs 25,000 crore to strengthen its balance sheet and for meeting future capital expenditure (capex) needs to boost 4G network in its efforts to compete with Bharti Airtel and Reliance Jio.

The rationale behind the demerger is to sharpen its focus on the business of fibre infrastructure in order to achieve larger infrastructure sharing, cost optimisation and operational efficiencies, which would thus result in delivering more cost-effective telecommunication services, the company said.

The fiber infrastructure business turnover forms an integral part of the overall turnover of the Vodafone Idea. Since fiber infrastructure unit does not charge any rentals for captive tenancy used by the company, separate financial statements of the unit are not relevant till the appointed date of the scheme of arrangement. Therefore, overall turnover, revenue and income of such fiber infrastructure business being transferred is not ascertainable, it said.

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