Infratel deal with Indus delayed for third time

New Delhi: The board of Bharti Infratel has again extended the deadline for completion of the company's merger with Indus Towers in order to comply with certain conditions, despite the government's nod for FDI enhancement on Friday.

“Since the other actions/conditions precedent to be fulfilled for the scheme (of merger) to become effective cannot be completed by the extended long stop date i.e. February 24, 2020, the board had further extended the long stop date till April 24, 2020, subject to agreement on closing adjustments and other conditions precedent for closing, with each party retaining the right to terminate and withdraw the scheme,” Bharti Infratel said in an exchange filing on Monday.

To be sure, this is the third deadline extension for the merger.

“The final decision to implement the scheme will be taken by the board keeping in mind the best interest of the company and its stakeholders including the assessment of the current crisis facing the telecom industry and the extent of its impact on the company’s major customers,” Bharti Infratel said.

Bharti Airtel and Vodafone Idea, the companies worst hit by the apex court ruling on adjusted gross revenue, are customers of the two tower companies.

The department of telecommunications (DoT) on Friday approved the merger of telecom tower companies Bharti Infratel and Indus Towers, giving a glimmer of hope to Vodafone Idea.

The DoT’s go-ahead pertaining to the foreign direct investment (FDI) enhancement was key for the merger of the two tower companies. This, in turn, will help Vodafone Idea divest its stake in the tower arm to raise funds.

Vodafone Idea has a 11.15% stake in Indus Towers, which it plans to monetise after the tower merger and this stake sale could fetch Vodafone Idea about ₹4,500 crore, Mint had reported on Friday.

The approval had come days after a series of meetings between Vodafone Idea chairman Kumar Mangalam Birla and top government officials. Birla met telecom secretary Anshu Prakash on Tuesday, and followed it up with a meeting with finance minister Nirmala Sitharaman on Wednesday, to share his concerns over the possibility of DoT invoking bank guarantees of the telecom operator.

Raising funds is important for Vodafone Idea, which owes ₹50,000 crore in adjusted gross revenue (AGR) dues to the DoT. The Supreme Court in October upheld the government’s definition of AGR based on which companies pay levies.

Vodafone Idea has been the worst hit by the verdict. Its last-ditch efforts to earn a reprieve from the apex court on Monday failed. Subsequently, it paid ₹2,500 crore of the dues on the same day, and another ₹1,000 crore on Thursday.

To be sure, the tower companies had announced their merger back in April 2018, but were awaiting DoT’s approval.

Bharti Infratel’s board had allowed two extensions of the long stop date—first on 24 October and then on 24 December—to secure more time for the approval.

The merger of Bharti Infratel and Indus Towers will create the world’s second largest tower company. The combined entity will own more than 163,000 towers, second only to China Tower.

Under the proposed merger, Bharti Airtel, which currently owns a 53.5% stake in Bharti Infratel, will own between 33.8% and 37.2% in the merged entity, while Vodafone Plc. will hold 26.7-29.4%. However, Airtel and Vodafone Plc. will have equal rights in the merged tower entity.

Vodafone Plc. and Bharti Infratel Ltd hold 42% each in Indus Towers, while Vodafone Idea Ltd owns 11.15% and US-based private equity fund Providence owns 4.85%.