TelecomLive April-2020

AGR Dues www.telecomlive.com 40 Telecom LIVE April 2020 at less than wholly-owned subsid- iaries is not directly available to service debt at India. As a result, a significant expansion of India's cash flow is required to achieve meaningful debt reduction on a consolidated basis," it added. Voda Idea may borrow from Oaktree against its Indus stake, but Bharti may renego- tiate the merger deal Vodafone-Idea may get some relief soon. Oaktree Capital, a foreign financial company work- ing aggressively in distressed funds, has agreed to pay funds to them against the potential realisa- tion from the 11.5 per cent stake sale in Indus tower. Oaktree Capital Group LLC, is one of the world's largest dis- tressed debt investors, and is aggressively bidding in India. Oaktree bought the loan book of DHFL at Rs 1,375 crore recently. Considering the developments of the merger of Bharti Infratel and Indus Towers in final stages, Vodafone is expected to receive Rs 4,500 crore from its stake sale in Bharti Infratel and Indus Infra- structure deal. As when the merger is complete Oaktree capi- tal will take its payment from the deal. Bharti and Vodafone PLC own 42 per cent each in Indus Towers, Vodafone Idea around 11.15 per cent and Providence 4.85 per cent. However, Bharti Infratel is said to be hesitant about going ahead with the plan involving 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. In an exchange filing, Bharti Infratel said, “Since the other actions/conditions precedent to be fulfilled for the scheme (of merger) to become effective can- not be completed by the extended long stop date i.e. February 24, 2020, the board had further extended the long stop date till April 24, 2020, subject to agree- ment on closing adjustments and other conditions precedent for closing, with each party retaining the right to terminate and with- draw the scheme.” The reason for deferring the deal could be due to uncertainty over the survival of cash-strapped Vodafone Idea, which is facing AGR dues of around Rs 57,000 crore, and the changed industry scenario. The tenancy of the tower business depends upon the sur- vival and viability of Vodafone Idea. In case of the worst eventu- ality, the tenancy will severely decline and that will adversely affect the tower company. Since the time the merger was announced, ground realities have changed totally. Industry is now down to three private players. 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 negotia- tions before closing the deal. Hughes Network to clear AGR dues: Official US satellite communications provider Hughes Network Sys- tems has no plans to shut its Indian arm, Hughes Communica- tions India Pvt Ltd (HCIPL), and will clear its AGR dues. “With regards to AGR dues, we are looking to fully comply with the orders (of the Supreme Court) and intend to settle all dues…our in-country services will not be disrupted in any manner during or subsequent to the process,” said Pranav Roach, president, Hughes Network Systems India Pvt Ltd, holding company of HCIPL. Earlier, HCIPL sent a letter to DoT, claiming that the company would go bankrupt and be forced to shut down if compelled to fork out AGR dues to the government. DoT has estimated Hughes' AGR dues at around Rs 600 crore. HCIPL has 200-odd employees and delivers satcom services and satellite broadband connectivity to multiple industry sectors, includ- after a meeting with telecom sec- retary Anshu Prakash. He said the government had asked companies to self-assess their statutory dues. “They asked us to self-assess; we have self- assessed and paid,” he said. The DoT had estimated Airtel's dues at around Rs 37,000 crore. Then Covid-19 struck, DoT got the perfect excuse for not doing anything for recovery of its AGR dues. Other related developments Bharti Airtel has capacity to withstand $5 bn payout: Moody's Moody's Investors Service said Bharti Airtel has the financial capacity to withstand a payout of $5 billion in statutory dues. It said a Rs 35,300 crore cash payment will not cause a significant deteri- oration in the credit quality of Bharti Airtel while in the alternate scenario of a smaller cash pay- ment of Rs 25,200 crore reflecting the principal and interest amount only, would position the company more comfortably within its cur- rent rating. As on December 31, 2019, the firm had consolidated cash and short term investments of $4.2 billion, with around $2.3 billion held at the Indian operations. "Following recent capital-raising, we estimated (Bharti's) cash is over $5.0 billion, which can be used to fund the final AGR pay- ment," Moody's said. Moody's further said that fun- damentals in the Indian telco industry are improving, but uncer- tainty around the sustainability of the improvement and future cash requirements (including 4G/5G spectrum auction) remains. Moody's said India accounts for around 75 per cent of Bharti Airtel's debt and 60 per cent of EBITDA. "Debt levels and cash costs are high for this segment and need to be serviced from India's own organic cash flow," it said. "Cash and EBITDA generated