The board of Bharti Infratel on Monday extended by another two months the deadline for the closure of its merger with Indus Towers to April 24 and said the implementation of the deal will depend on the impact of the current adjusted gross revenue (AGR) crisis on the industry and the company’s customers.
The long stop date has been extended for the third time “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 a statement to the exchanges Monday.
ET had reported on February 21 that the long stop date for the deal will be extended to April 24.
“The final decision to implement the scheme will be taken by the board keeping in mind the best interests 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 added.
Shares of Infratel, India’s only listed tower company, closed 4.6% at Rs215.80 on the BSE Monday, amid investor fears of the impact AGR crisis on Vodafone Idea, a key tenant of Infratel. Vodafone Idea plunged 11.8% to Rs3.88 on the BSE.
The deal, which received foreign direct investment (FDI) clearance on Friday, now needs be cleared next by the National Company Law Tribunal, Chandigarh, and then taken on record by the Registrar of Companies, a process which will take at least two to three months.
But Vodafone Idea, which was hoping to net some Rs4,500 crore by selling its 7% stake in the merged entity, needs cash urgently to pay off even a part of its thousands of crores of adjusted gross revenue (AGR) duesby its March 17 deadline. The company has said it will be forced to close unless it gets some relief on the AGR dues from either the government or judiciary, neither of which has come so far.
Rajiv Sharma, research head at SBICap Securities, said the viability of the Bharti Infratel-Indus merger depends a lot on Vodafone Idea’s survival.
“Any final decision on going ahead with the proposed towers merger will hinge on whether Vodafone Idea survives the AGR shock… since a large chunk of the merged tower company’s future tenancy revenues will come from Vodafone Idea, which will go away if it shuts down,” said Sharma.
He added that “a mere survival of Vodafone Idea will be a key downside support or Bharti Infratel share price; however any major relief (on AGR) could boost growth for Bharti Infratel.”
Department of Telecommunications (DoT) estimates show VIL needs to shell out nearly Rs 57,000 crore towards AGR dues, of which it has paid only Rs 3,500 crore. The telco, though, estimates its dues to be much lower at about Rs 23,000 crore, of which Rs 7,000 crore is the principal. Experts said VIL would find it difficult to pay even the lower amount by the due date.
Under the Bharti Infratel-Indus merger terms, cash-strapped VIL has the option to sell its entire 7% stake it will get in the merged entity to shareholders for cash, based on an agreed formula. VIL is expected to generate about Rs 4,500 crore via this route.
Indus Towers is co-owned by Bharti Infratel, UK’s Vodafone Group Plc and VIL, with the first two holding 42% each. VIL owns 11.15% while the remaining 4.85% is with the private equity firm Providence. Bharti Airtel has a majority stake in Bharti Infratel.
Alternatively, VIL can sell the stake to a third party. But under current circumstances, when the telco is in need for urgent cash, selling to existing shareholders under a pre-agreed formula may be the best and quickest option, according to industry executives.
The Bharti Infratel and Indus Towers merger deal was signed on April 2018, and the deal was to have been concluded by October 2019. Subsequently, the companies extended the deal initially by two months to December 24, 2019, and another two months to February 24, in absence of DoT approval.
Source: Economic Times