NEW DELHI: In a move set to provide relief to cash-strapped telecom major Vodafone Idea, the Department of Telecom (DoT) has given its approval for the merger of mobile tower companies Bharti Infratel and Indus Towers. The deal may result in as much as Rs 4,500 crore flowing to Vodafone Idea if it chooses to exit the venture, a handy sum which will help the telco pay more of its AGR dues.
“FDI approval for merger of Indus Towers Ltd with Bharti Infratel Ltd has been received late evening yesterday. The board of directors of the company will meet on February 24, 2020, to take stock and decide the future course of action,” Bharti Infratel said on Saturday in an exchange filing. The merger will create a pan-India tower company with over 163,000 towers, operating across all 22 telecom service areas, which will become the largest tower company in the world outside China.
Indus Towers is a joint venture where Bharti Infratel and Vodafone Plc own 42 per cent each, while Vodafone Idea holds a 11.15 per cent stake. According to the contours of the deal announced in 2018, Indus Towers and Bharti Infratel will merge into a single entity called Indus Towers Ltd and Vodafone Idea could opt to exit the new entity if it chose to. Vodafone Idea officials have been banking on the closure of this deal resulting in a cash inflow of as much as `4,500 crore.
The approval comes at a fortuitous time for Vodafone Idea since the company has declared uncertainty in its ability to continue as a going concern if forced to pay up all its adjusted gross revenue (AGR) dues in one go. According to DoT estimates, the telecom major owes as much as `53,038 crore in AGR liabilities, of which it has paid only `3,500 crore so far.
The company had been struggling to come up with sufficient liquid cash to pay the rest of what it owes even as the next hearing on the matter at the Supreme Court (SC) approaches on March 17. An outraged SC had warned in February that if any telco did not comply with its order to pay up AGR dues to the DoT in full, the telco’s managing director and other board members would be asked to show cause why contempt of court proceedings should not be begun against them.
The DoT’s approval comes after Vodafone Idea chairman Kumar Mangalam Birla met the finance minister, telecom minister and the telecom secretary over the past few days in a series of whirlwind meetings where the telecom industry and the government have been trying to thrash out a route where the SC’s orders are complied with, without resulting in the market losing a major service provider in Vodafone Idea. Bharti Airtel owner Sunil Bharti Mittal has also had similar meetings with the finance minister and the telecom secretary.