Bharti Infratel awaits SC verdict on AGR for merger with Indus Towers

New Delhi: Bharti Infratel is said to be hesitant about going ahead with a plan involving a merger with Indus Towers and a buyout of 7 per cent equity stake from Vodafone Idea in the resultant entity. While almost all clearances have been obtained, the company has sought to extend the process by another two months.

People with knowledge of the matter said the reason is uncertainty over the survival of cash-strapped Vodafone Idea, which is facing adjusted gross revenue (AGR) dues of around Rs 57,000 crore, and the changed industry scenario.

Majority owned by Bharti Airtel, Infratel is awaiting the outcome of the next hearing in the Supreme Court on the AGR issue on March 17, that will take stock of payments by telecom operators including Vodafone Idea. The latter is pressing for the deal to be implemented at the earliest, so that it can monetise its 7 per cent in the merged entity for Rs 4,500 crore — as per agreed terms — and pay off a part of AGR dues, said the people cited above.

“The tenancy of the tower business depends upon the survival and viability of Vodafone Idea,” said a senior official familiar with the development.

“In case of the worst eventuality, the tenancy will severely decline and that will adversely affect the tower company.” Vodafone Idea and Infratel didn’t respond to ET’s queries. “Since the time the merger was announced, ground realities have changed totally,” said an industry executive.

“Industry is now down to three private players, with one barely surviving. Average sharing factor (for Infratel) is already down to 1.85 from 2.30 as on March 31, 2018… One has to take into account the changed scenario in fresh negotiations before closing the deal.” Bharti Infratel closed 1.1 per cent up at Rs 218.75 on Wednesday. It’s down more than 33 per cent since the merger announcement.

Bharti Infratel has to submit the telecom department’s (DoT) clearance document to National Company Law Tribunal (NCLT) Chandigarh. NCLT can then give final approval within a week or two, since this is a “formality,” said one of the persons cited above. “But Infratel has extended it by two months.”

“Vodafone Idea has already informed the government that the proceeds from monetisation of Indus Towers stake would be used toward payments of AGR dues,” said a person involved in discussions with DoT. “All parties to the merger deal have assured their readiness to do the needful to enable government receipts funds from Vodafone Idea.”