Indus Towers, the Indian tower company, has advised the Telecom Regulatory Authority of India (TRAI) that it may restrict infrastructure services to mobile network operator, Vodafone Idea (Vi), and explore legal remedies to speed up the recovery of outstanding receivables, Economic Times reported. The tower company criticized the cash-strapped MNO for its “willful and continuous” failure to make contractual payments under its Master Services Agreement.
Vi’s health is vital for Indus Towers’ long-term financial stability. The towerco, which is 21 percent owned by U.K.-based Vodafone Group, reports that Vi represents about 40 percent of its revenue. Yet, Vi has been struggling to raise funds it needs to pay the Indian government for spectrum licenses, its network equipment vendors Nokia and Ericsson, and American Tower’s ATC India operation, Inside Towers reported. Moreover, Vi has been losing subscribers each quarter and needs a funding infusion to expand its 4G coverage and invest in its pending 5G rollout to compete effectively with bigger rivals, Reliance Jio and Bharti Airtel.
Indus Towers reported 198,284 towers with an average tenancy of 1.75, in the quarter ending June 30, making it India’s largest tower company, according to Inside Towers Intelligence. The tower company told TRAI that Vi owes it $944 million (including interest) as of September 30. Indus Towers says that the payment default situation persists, slowing its cash flow and causing it financial and operational difficulties that are affecting its customer services.
Indus Towers Managing Director and CEO Prachur Sah in an October 3 letter to TRAI said, “Vi’s defaults and actions have put Indus in serious financial constraints and a precarious situation. In case of Vi continuing to breach its payment obligations, Indus will not only have recourse to all lawful remedies but also be entitled to mitigate its losses by restricting its services for Vi.”
Indus Towers claims that Vi’s statements in a September 29 letter to TRAI regarding its inability to fulfill its monthly contractual payment obligations to the tower company were “misleading and deceptive.”
Vi’s letter, Sah said, is “another futile attempt” by the telco to gloss over non-compliance of its contractual responsibilities/obligations and avoid consequences of such contractual breaches. He added that Vi had “no lawful cause or justification” for invoking TRAI’s jurisdiction in a contractual dispute where it’s already in default of its obligations.
In September 2022, Vi committed to making timely and complete payments to Indus Towers towards the overdue amount, including interest, from January to July 2023, with a minimum commitment of $60 million a month, Economic Times reported.
“The company has been pursuing payments since early 2022, and even made a one-time settlement agreement with [Vi] in February 2022 as a gesture of goodwill. However, despite this, Vodafone Idea has persistently defaulted on payments, breaching agreements,” Sah’s letter reads.
Industry observers suggest that if Indus Towers imposes service restrictions, Vi’s mobile coverage for its current 228 million subscribers could face serious disruption, leading to further market share erosion.
By John Celentano, Inside Towers Business Editor
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