Parents back $2B turnaround strategy at VHA

Parents back $2B turnaround strategy at VHA

04 DEC 2012

Vodafone and Hutchison Whampoa have reportedly pumped over US$2 billion into their struggling Australian JV, VHA, the country’s number-three mobile operator.

The Australian Financial Review reports that the parent firms approved the funding at a VHA board meeting in Hong Kong last week, backing a turnaround plan being plotted by VHA CEO Bill Morrow.

The two parents are said to be injecting AUD2 billion (US$2.1 billion), thought to be a combination of shareholder-backed loans and equity. The funds are reportedly to be used to repay AUD1.3 billion in external bank debt due for refinancing by mid-2013, and to complete upgrades to VHA’s mobile network, including the launch of LTE next year.

News of the fresh funding is likely to allay fears that Vodafone and Hutchison could exit Australia after a nightmare period for the JV. VHA has lost more than 700,000 subscribers and AUD600 million since the beginning of 2011 amid on-going network problems, which have badly damaged its brand.

Morrow has said that the firm will not spend large amounts of money on spectrum as it directs funding to more pressing areas. “The idea we are not going to be spending a lot of money on the [digital dividend] auction is a safe bet,” he told the Australian Financial Review earlier this year.

This position is thought to have prompted the Australian government to delay the planned auction, fearing that Vodafone’s withdrawal would reduce competition among bidders.

Although rivals Telstra and Optus have already launched LTE, VHA is concentrating initially on dual-carrier HSPA+ (branded as ‘3G+’) which it launched in September.