Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ News / India/  Bharti Infratel extends long stop date on Indus Towers deal again
BackBack

Bharti Infratel extends long stop date on Indus Towers deal again

The uncertainty around Vodafone Idea’s financial position has left the Indus Towers deal hanging in a limbo
  • Vodafone has about 30% tower tenancies on Bharti Infratel and almost 50% tenancies with Indus Towers
  • The deal, which was signed in April 2018, once completed, is expected to create one of the world’s biggest telecom tower companies.Premium
    The deal, which was signed in April 2018, once completed, is expected to create one of the world’s biggest telecom tower companies.

    MUMBAI: Bharti Infratel board on Wednesday extended the long stop date for the long pending merger with Indus Towers to 31 August, the sixth such extension of the deadline for closing the deal.

    "Since the conditions precedent to be fulfilled for the scheme to become effective cannot be completed by the extended Long Stop Date i.e. June 24, 2020, the Board of Directors have further extended the Long Stop Date till August 31,2020, subject to agreement on closing adjustments and other conditions precedent for closing, with each party retaining the right to terminate and withdraw the scheme," stated an exchange filing by Bharti Infratel.

    The uncertainty around Vodafone Idea’s financial position, especially following the AGR (adjusted gross revenues) verdict from the Supreme Court has left the Indus deal hanging in a limbo. Vodafone Idea’s financials matter because the telecom operator has about 30% tower tenancies on Bharti Infratel and almost 50% tenancies with Indus Towers. Some impact of the pandemic and resultant change in telecom demand as well as the financial situation of stakeholders is also likely to be factored before completion of the merger.

    Bharti Airtel holds 53.5% shares of Bharti Infratel, 10% is held by KKR/CPPIB and 35.5% is public. UK-based Vodafone Group Plc holds 42% shares of Indus Towers, followed by 11.2% of Vodafone Idea and 4.8% by Providence. Vodafone Group Plc owns 44.4% stake in Vodafone Idea.

    The deal, which was signed in April 2018, once completed, is expected to create one of the world’s biggest telecom tower companies.

    Hearing the case on dues related to adjusted gross revenue or AGR of the telecom companies, the top court on 18th June directed them to furnish details of revenues earned and taxes paid in the last 10 years for review by Department of Telecommunications (DoT). This was after the telcos submitted before the apex court that furnishing bank guarantees under their current strained financial health will hamper planned investments. The telcos are hoping for a 20-year staggered payment plan although the court is likely to order some upfront payment which can impact Vodafone Idea's financial position.

    “We believe the cloud on Vodafone Idea’s viability remains an overhang on the Indus merger. We think the board will prefer to get more clarity on the SC decision on staggered payment terms before taking the final decision on the merger," noted a report by Credit Suisse following the initial court discussions on 11th June.

    The Supreme Court has given the DoT time till the third week of July to consider the telecom company proposals on payment of AGR dues. This directive of the court is largely being perceived as a positive for the telecom ecosystem.

    “This (extended payment plan for telcos) will have positive read-through for Infratel as it would put an end to tenancy consolidation, which has been affecting its performance for the past three years. Infratel would be able to grow its tenancies from FY21, putting behind tenancy cancellation due to operator consolidation," wrote Edelweiss analysts in June.

    There are concerns that a weaker Vodafone Idea will be forced to close down its tenancies across the weaker markets which will impact both tower companies. Half of Vodafone Idea tenancies with Bharti Infratel and a quarter of its Indus tenancies are spread across weaker ‘C’ circles. According to CLSA estimates, losing Vodafone Idea tenancies will cause Bharti Infratel’s revenue to be hit by 3%-10%.

    Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
    More Less
    Published: 24 Jun 2020, 06:47 PM IST
    Next Story footLogo
    Recommended For You
    Switch to the Mint app for fast and personalized news - Get App