Vodafone Idea may fail to pay contractual dues, cautions ATC

5 Dec 2022 , 10:02 AM

In a recent filing to the US Securities and Exchange Commission (SEC), American Tower Corporation (ATC) stated that Vodafone Idea (Vi) may be unable to meet its operating obligations, including future payments, which could have a significant negative impact on the US tower company’s business and results of operations. Vi is ATC’s largest customer in India.

It also stated that Vi’s payment shortfall in the quarter ended September 2022 was approximately $48 million (approx. Rs391 crore), prompting the Boston-based tower company to defer revenue recognition on the shortfall sum until payment is received from its loss-making customer.

While Vi has communicated its intent to fulfill the full amount of its contractual obligations beginning January 1, 2023, no assurances can be given that this will occur, according to the US tower company.

Under adverse outcomes, the US tower company has also warned that Vi’s recent preferential bond issue is subject to conditions that may or may not be met. The government converting the Rs16,130 crore accrued interest on Vi’s deferred AGR-related dues into equity is a key condition.

On October 21, Vi’s board approved the issuance of Rs1,600 crore in rupee-denominated, optionally convertible, unsecured, unrated, and unlisted debentures (OCDs) to ATC Telecom Infrastructure (ATC). The cash will be used to repay dues to the US tower company, which are estimated to be less than Rs2,000 crore.

However, as per the reports, the loss-making telecom operator hasn’t received any response from the government since April on the conversion of its accrued interest on deferred AGR-related dues into equity.

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