Airtel to buy Vodafone's 4.7% stake in Indus Towers but with a rider

Telecom operator Bharti Airtel on Friday said it has signed an agreement to buy Vodafone's 4.7 per cent stake in Indus Towers on the condition that the proceeds will be used for investment in Vodafone Idea and clearing its dues towards the mobile tower company.

Debt-ridden Vodafone Idea (VIL) has been unable to pay dues to Indus Towers and both VIL and promoter Vodafone have proposed a payment plan to clear the outstanding amount by July 15.

In the meantime, VIL has committed to pay certain minimum amount each month to Indus Towers.

"Bharti Airtel has...entered into an agreement with Vodafone to buy 4.7% equity interest in Indus Towers on the principal condition that the amount paid shall be inducted by Vodafone as fresh equity in Vodafone Idea Limited (VIL) and simultaneously remitted to Indus Towers to clear VIL's outstanding dues," Airtel said in a statement.

Vodafone through its group firm Euro Pacific Securities has sold 2.36 per cent stake in Indus Towers in a bulk deal at an average price of Rs 226.84 per share to an undisclosed buyer for about Rs 1,441.62 crore at NSE on Thursday.

Airtel said the acquisition of stake would be at an attractive price representing a significant discount typically available for such large block transactions.

"In addition, Airtel is also protected with a capped price which is lower than the price for the block of Indus shares sold by Vodafone on February 24, 2022.

"This shall be value accretive to Airtel and protect its existing significant shareholding in Indus Towers.

"Any such acquisition shall only be done when such proceeds are confirmed to be utilised by Vodafone to infuse as equity into VIL including any regulatory or shareholders' approval being fully obtained," Airtel said.

The Sunil Bharti Mittal-led firm said the transaction allows it to secure continued strong provision of services from the mobile tower company, protects and enhances Airtel's value in Indus Towers while enabling it to receive rich dividends and paving way for subsequent financial consolidation of Indus Towers in Airtel.

Currently, Vodafone holds about 28 per cent stake in Indus Towers, while that of Bharti Airtel is close to 42 per cent.

"Airtel remains committed to look at opportunities for monetising this vital asset at an appropriate time.

"In doing so we will ensure that the tower company has been stabilised and any new strategic or financial investor or investors has the ability to continue to serve the critical needs of Airtel," the statement said.

Indus Towers, formerly Bharti Infratel Ltd, is a leading provider of passive telecom infrastructure.

It deploys, owns and manages telecom towers and communication structures for various mobile operators.

The company's portfolio of over 1,84,748 telecom towers makes it one of the largest tower infrastructure providers in the country with presence in all 22 telecom circles.

It caters to all wireless telecommunication service providers in India.

Indus Towers posted about 16 per cent rise in consolidated profit at Rs 1,570.8 crore in the three months ended December 2021, while revenues stood at Rs 6,927 crore during the same period.

Telecom service providers got a shot in the arm with the government last year approving a blockbuster relief package that included a four-year break for companies from paying statutory dues, permission to share scarce airwaves, change in the definition of revenue on which levies are paid and 100 per cent foreign investment through the automatic route.

The government also gave telcos the option to convert the interest amount pertaining to the moratorium period into equity.

Subsequently, debt-ridden Vodafone Idea Ltd opted to pay interest of around Rs 16,000 crore through preferential shares.

This will result in the government holding 35.8 per cent stake in the company.

Last month, the company reported widening of its consolidated loss to Rs 7,230.9 crore while consolidated revenue from operations declined to Rs 9,717.3 crore in the third quarter ended December 2021.

Vodafone Idea's total gross debt, excluding lease liabilities and including interest accrued but not due, as of December 31, 2021 stood at Rs 1,98,980 crore.

The amount comprised deferred spectrum payment obligations of Rs 111,300 crore, AGR liability of Rs 64,620 crore that are due to the government and debt from banks and financial institutions of Rs 23,060 crore.

Shares of Indus Towers closed at Rs 214.2 apiece, up 4.11 per cent on the BSE.