Indus Towers has advised mobile network operator Vodafone Idea (VI) that VI must clear all of its backlogged site leasing payments before deploying new 5G equipment on Indus Towers’ sites, Economic Times reported. Ambit Capital estimated VI owes Indus Towers around $1.2 billion. Indus Towers is India’s largest tower company, and VI is India’s third largest mobile network operator and Indus Towers’ largest customer, according to Inside Towers Intelligence.
Financially strapped VI has been losing subscribers to larger MNO rivals, Reliance Jio and Bharti Airtel, for the past two years. Unable to raise funds until now, VI has not invested in upgrading its existing 4G network or deploying new 5G equipment needed to stay competitive with Jio or Airtel.
However, VI recently raised nearly $2.2 billion through the follow-on public offer and is negotiating with its lenders for a $3 billion debt issue. Those two financial facilities will get VI close to its targeted $5.4 billion fundraise.
“They [Vodafone Idea] will not get new services until they pay money. They have a lot of old dues which they need to pay up. They have raised money, now they should be able to pay up,” Bharti Aitel Chairman Sunil Mittal commented to Economic Times.
Mittal added that until VI clears what it owes Indus Towers, it won’t be allowed to use the tower company’s infrastructure for any new services such as 5G. Airtel is the largest stakeholder in Indus Towers with around a 48 percent stake.
VI has indicated that most of the funds raised will be used to expand its 4G network and roll out new 5G services in the next several months using network equipment from Ericsson (NASDAQ: ERIC) and Nokia (NYSE: NOK), according to Economic Times.
Moreover, Akshaya Moondra, VI’s chief executive, said the MNO would not use the proceeds of its fundraise to clear dues of any promoter or promoter group entity, alluding to Indus, Economic Times reported. He did not give any timeline for VI clearing what it owes to Indus, saying the company would pay any outstanding dues out of the cash flows generated from operations, going forward.
So Indus Towers is walking a fine line. The towerco needs new tenancies to expand its own business. And VI is critical to Indus Towers, accounting for around 40 percent of the towerco’s revenue, according to Inside Towers Intelligence.
Mittal acknowledged that the Indus board would be flexible with its decisions if VI pays down a substantial amount of the outstanding billings owed then schedules payments for the balance.
VI’s management said in its latest earnings call that the company expects to clear all vendor dues in the ongoing fiscal year and that the proceeds from the latest fundraise would enable it to upgrade its network and stem subscriber losses.
VI expects its capital expenditure for network upgrades to be on par with what rival Bharti Airtel has spent over the last three years, roughly $3.4 billion a year.
By John Celentano, Inside Towers Business Editor
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