Is Vi Fundraise A Good Start? CloudExtel's Kunal Bajaj View | NDTV Profit - video Dailymotion

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00:00 Kunal Bajaj, CEO and co-founder of CloudXtel,

00:03 is with us on the show to give us his perspective.

00:06 Very good morning, Kunal.

00:07 Great to speak with you on NDTV Profit.

00:11 Let's begin with your take of the figure that

00:13 has come out of the board meeting yesterday,

00:15 and 45,000 crores and all 20,000 crores of that equity.

00:19 Do you think it's doable right now?

00:22 Is it overambitious?

00:24 Good morning.

00:25 How are you guys today?

00:26 And thank you so much for having me on this morning.

00:29 Certainly, I think Vodafone has been at this

00:32 for quite some time now.

00:33 They would have certainly spoken to all the relevant investors.

00:37 And because we've been hearing this news come out

00:39 in bits and pieces and grabs over the months,

00:41 saying that the fundraisers right around the corner.

00:44 So I think it's very positive that finally they've

00:46 had a definitive board meeting where they are talking

00:49 about this specific numbers, approving it.

00:51 And also, we've been hearing a lot of good messaging

00:53 from the promoters that they're not walking away from this.

00:56 So they're ready to participate from an equity level.

00:58 So it looks like the light might finally

01:01 be there at the end of the tunnel.

01:04 Does it matter how much the promoters put in

01:07 and how many external investors come in?

01:09 Because that's the hitch, right?

01:11 They've been hunting for external investors for a while.

01:14 And they really haven't seen any big player

01:18 come and put their might behind Vodafone.

01:20 In fact, Nomura note out this morning

01:22 that have kept their rating to reduce.

01:25 They've maintained a target price of 6 and 1/2 rupees.

01:27 And say it's positive if they're able to bring

01:30 in external investors.

01:31 How key is that in your view, Kunal?

01:34 Yes, so I do agree with that.

01:36 Because at the end of the day, even

01:39 with promoter participation, we know

01:40 that the promoter participation is going to be limited.

01:43 So the 45,000 crores that we're talking about,

01:45 of which, as you mentioned, 20,000 crores is equity,

01:48 that's OK for now.

01:49 But that's not enough for what is really

01:51 going to be required from a debt repayment perspective,

01:54 as well as from a CapEx commitment perspective

01:56 over the next three to five years.

01:58 So this is not a one-time thing which we need to look at.

02:01 We need to look at what is going to be the commitment to fund

02:05 and strengthen and reinvest in VIL over the next three

02:09 to five years.

02:10 And only if we have that consistent commitment that's

02:12 going to continue to be there will we

02:14 expect them to be able to really bounce back from the situation

02:17 that they're in today.

02:18 So I think that's why external participation is

02:20 quite important.

02:22 Kunal, dues that Vodafone will owe is 5,400 crores in F525

02:29 and 30,000 crores in F526.

02:32 That's over 35,000 crores that's payable over the next two

02:35 years.

02:36 Now, if you're looking at a fundraiser of 45,000 crores,

02:39 how is that math going to work out

02:41 if the big push is going to be towards expansion?

02:43 And that's the need of the hour as well.

02:46 Yeah, no, I completely agree with you.

02:48 And I think that's exactly the point,

02:49 that this 45,000 crores is just a start.

02:52 Even if, like you said, you look at just the debt amount,

02:55 40,000 crores due in the next two years, of which 95%

02:58 is also due to the government.

03:00 So unless the government steps in and decides

03:03 that they are going to further enhance the support

03:05 and the package, which they have already extended to the telecom

03:08 sector, or which they may specifically

03:10 have to extend to Vodafone, then yes, it's certainly

03:13 not going to be enough in terms of the mathematics.

03:15 Because in addition to this, they have vendor dues,

03:17 plus they haven't yet started the 5G rollout.

03:19 But I think that's exactly to the point that

03:21 was being made earlier.

03:22 If you have an external financial investor

03:25 or strategic investor that comes and participates in this,

03:27 then that will show a longer term commitment.

03:29 Because no financial investor is going

03:31 to come in thinking that I'm only

03:33 going to put in 20 today, or a certain amount today,

03:35 and that's going to be it.

03:36 Because I think everybody realizes

03:37 that this is a long journey for Vodafone

03:40 to get back out of the situation that they've gotten themselves

03:43 into today.

03:44 Can I have one quick question?

03:45 I know part of the fundraise is going to be through debt,

03:47 and part of it is going to be through equity.

03:50 Now getting external investors may or may not

03:52 be challenging from the look of it.

03:54 It doesn't seem like it's an easy task.

03:56 And the timeline is next quarter,

03:58 which makes it even more challenging.

04:00 Assuming that they do go out and raise the equity,

04:03 the rest of it is raised through debt,

04:05 is the cost of funding going to be something

04:08 you want to watch out for?

04:09 Because getting the money is one thing,

04:11 but getting the money expensive is only

04:14 going to make this tougher looking ahead

04:16 for the next couple of years.

04:19 Completely agree with you on that,

04:21 because you can't raise debt in such a way

04:23 that you end up making the whole bigger for yourself.

04:26 So today, I think one of the good things

04:28 is that, at least from an external financial debt

04:31 perspective, i.e.

04:32 non-government debt, they've been

04:33 able to get a lot of things under control

04:35 over the past couple of years.

04:36 And they've been picking away at that

04:38 and actually being quite responsible about it.

04:41 It's the government debt today that's the major overhang.

04:43 But yes, if you raise very expensive debt

04:45 from external markets just in order

04:47 to get external investors participating,

04:49 then the cost of that debt, you're right,

04:51 is going to create a bigger problem.

04:54 And that's probably why I think what we're looking at

04:56 is something that is going to be a combination of the debt

04:59 and the equity and potentially some kind

05:01 of structured instrument that may come in as well.

05:04 Kunal, I just want to understand what this is going

05:08 to do for them in real term.

05:10 So if you look at their press release

05:12 and what they've sent to the exchanges,

05:14 obviously, as expected, they're very optimistic.

05:16 They say that we've been improving 4G, 5G, rollout,

05:20 et cetera.

05:21 But look at the industry right now,

05:23 where you have very strong competitors, essentially

05:27 a duopoly with Vodafone kind of hanging on,

05:30 if we're being very honest.

05:31 So to what extent can those goals be achieved,

05:36 even if a 45,000 crore fund raise goes out successfully?

05:45 So I think the fact that Vodafone has survived this long

05:48 with such intense competition and also being almost two years

05:52 behind the ball from a launch of 5G perspective

05:54 shows, as well as the fact that they've

05:56 been able to decrease the bleed in terms of number

05:59 of subscribers which are exiting.

06:01 And like you said, some of the optimism

06:03 which they have displayed have come out

06:04 in last quarter's numbers, where you've

06:06 seen quarter on quarter improvement in EBITDA.

06:08 So I dare to say maybe we are sort of already at the bottom.

06:14 And this is kind of the last opportunity, but also

06:18 the right time for this type of investment

06:20 to come in, because the customers who are still there

06:23 on Vodafone are clearly very, very loyal to them.

06:26 So you do have high levels of churn,

06:27 but that's typically in the prepaid user base

06:29 at the very bottom.

06:30 But the postpaid subscribers that they have,

06:32 the corporate customers that they have,

06:34 the higher value customers who have been using 4G

06:36 for a long time, the fact that many of those

06:38 have still not churned out, despite the fact that 5G is

06:41 available in the market and it's been available in the market

06:43 for almost two solid years now, shows

06:45 that you have some real loyalty that's left.

06:47 And if Vodafone can recover from that,

06:49 deliver back on its network quality, launch 5G,

06:52 and really provide those same services to that loyal user

06:55 base, there is an opportunity to bounce back,

06:57 leveraging the spectrum assets they have,

06:59 leveraging the network assets that they have,

07:00 and clearly the goodwill that they

07:02 have with this customer base.

07:04 And in terms, Kunal, of impact, say, on a Bharti Airtel,

07:08 there's Morgan Stanley note out this morning talking about

07:12 whether this impacts Bharti Airtel at all.

07:14 And their take, at least, is that it's a limited upside.

07:17 And all this does is prevent further consolidation

07:21 in the industry as of now, so a lease of life.

07:24 In your view, is there any impact on Bharti Airtel?

07:27 And additionally, how do you view the government efforts

07:31 to revive and grow BSNL in this bigger context?

07:36 Yeah, so I think from that perspective,

07:38 the impact on Bharti Airtel, and on Jio for that matter as well,

07:42 is going to be quite limited in the sense

07:44 that the market is really big enough.

07:46 And we've had many more operators performing

07:50 financially very well, even in the past.

07:52 And I think we're at a stage where operators realize

07:55 that further competition, which is just

08:00 like an unsensible type of competition, where you're just

08:03 randomly cutting prices and things like that,

08:04 is not healthy for themselves or for the sector.

08:07 So if we have a strong Vodafone back again,

08:11 what we will have is a proper three-player market.

08:14 It's very unlikely that we would see, in the near term,

08:16 Vodafone get back to the type of market share

08:18 that they used to have before.

08:19 And therefore, they're not likely to take away

08:21 substantial amounts of market share from Airtel or Jio.

08:24 And at the same time, given that ARPUs have

08:26 been rising for everybody, you're

08:28 in a situation where the sector itself is growing,

08:31 and the health of the sector itself is growing.

08:33 And having this third operator around

08:34 is only going to help that.

08:35 So yeah, I agree.

08:37 I don't see too much of a negative impact

08:38 or a very limited potential downside on Airtel.

08:43 Just one quick last question.

08:45 This is more sector-related.

08:46 We've moved on from 3G, 4G, 5G, and now we are talking AI and IoT.

08:52 At a time like this, when we're already at the next leg,

08:55 you've got Vodafone not just one, but two steps behind,

08:58 in that sense.

08:59 How is it going to play out for the sector?

09:01 I mean, how is one going to monetize--

09:03 and not just Vodafone, right, even

09:04 the other players in the business--

09:06 monetize 5G at this stage?

09:08 Because if you've already moved to AI,

09:10 I'm guessing this is a challenge unless Elon Musk gets

09:13 into this business in India.

09:16 So with every launch of a new generation,

09:20 the initial launch phase has, by and large,

09:23 always disappointed, right?

09:24 So if you think about when 3G was first launched

09:26 and when 4G was first launched, everyone's like, hey,

09:29 this is just a faster 2G when 3G came out,

09:32 or when 4G was there, it's just a faster 3G.

09:34 But what you notice over a period of time

09:36 is as the capacity is made available

09:38 and device penetration really starts

09:40 to permeate across the user base,

09:43 the use cases start to come out that leverage the bandwidth

09:46 that's available, and that's when the monetization kicks in.

09:49 So the entire shift from 2G to 3G

09:52 was the shift basically from messaging

09:54 to browsing the internet.

09:56 And from 3G to 4G, the entire shift was to video streaming.

09:59 And now if you see where we are as a country, right,

10:01 we're amongst the largest-- not the largest--

10:03 consumer of YouTube content in the world.

10:05 You have all sorts of other types of video content

10:07 on Insta and others, which are now actually being monetized.

10:10 And business models have emerged,

10:11 not to mention all the OTT players.

10:13 So the shift to 5G, as we get that penetration,

10:16 you will get new use cases and new models coming out.

10:19 And then the monetization on that

10:20 will finally start to happen.

10:22 It just takes a little bit of time.

10:24 All right.

10:24 Thank you, Kunal.

10:25 Great chatting with you and getting some perspective

10:27 on what this approval of fundraise really means.

10:30 Of course, the first leg is to get in that fundraise.

10:33 And then, of course, what it could mean for Vodafone,

10:35 what it could mean for Indus Tower, smaller in nature,

10:37 but definitely worth the mention and the industry as a whole.

10:41 (dramatic music)

10:44 [XBOX SOUND]

Is Vi Fundraise A Good Start? CloudExtel's Kunal Bajaj View | NDTV Profit

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