Bharti Infratel delays deal with Indus
BHARTI INFRATEL’S BOARD HAS EXTENDED THE LONG STOP DATE FOR THE MERGER WITH INDUS TOWERS TO FEBRUARY 24, 2020
NEW DELHI: Bharti Infratel Ltd’s board on Tuesday approved a second extension to allow the tower company additional time to secure government approval for its merger with Indus Towers that was announced in April last year.
“The board has further extended the long stop date till February 24, 2020...with each party retaining the right to terminate and withdraw the scheme,” the company told the exchanges on Tuesday. Bharti Infratel first extended the long stop date to 24 December in October.
The proposed merger of Bharti Infratel with Indus Towers, a joint venture between Bharti Infratel, Vodafone Idea Ltd and Vodafone Group Plc, will create the world’s second-largest telecom tower company with more than 163,000 towers. It will allow Bharti Airtel Ltd, the parent of Bharti Infratel, and Vodafone Idea to sell their stake in the combined entity and use the proceeds to pare debt and invest in their flagging telecom operations.
The two mobile operators will also have to pay dues of as much as ₹49,990 crore to the department of telecom (DOT) after a court verdict in October upheld the state’s definition of revenue, based on which the telecom companies pay levies to the government.
“The proposal is stuck with the department of revenue because of concerns over the withholding tax case against Vodafone Group, which are yet to be resolved,” a person familiar with the matter said on condition of anonymity. “Vodafone is a direct shareholder in Indus Towers and hence the delay in approvals.”
An emailed query to DOT was unanswered till press time.
Even if the companies secure government approval, monetizing their stake in the merged tower company may still be a difficult task given the uncertainty surrounding the ability of Vodafone Idea to survive without a government bailout. Bharti Airtel and Vodafone Idea will be the anchor tenants of the merged tower entity and any loss of business for the tower company will affect its valuation.
At the Hindustan Times Leadership Summit earlier this month, Aditya Birla Group chairman Kumar Mangalam Birla said the group’s telecom unit, Vodafone Idea, would have to “shut shop” if there was no relief from the government following the Supreme Court ruling on adjusted gross revenue (AGR).
Bharti Airtel has set aside ₹34,260 crore and Vodafone Idea has made provisions for ₹25,677.9 crore in the September quarter after the Supreme Court order.
“The merger provides an avenue for Airtel and Vodafone Idea to raise funds. However, AGR issue remains a major overhang for the telecom industry,” said Ankit Jain, assistant vice president of corporate ratings at ICRA Ltd.