Tower companies weigh reworking deals with AGR-hit companies

The tower companies could consider payment holidays for Vodafone Idea and Bharti Airtel for the first three-to-six months on new sites or do away with the lock-in period for new tenancies, industry officials said.

MUMBAI | KOLKATA: Telecom tower companies are exploring changes to their master service and rental agreements with Vodafone Idea and Bharti Airtel to ease the financial pressure on the operators, especially after the Supreme Court ruling on dues based on adjusted gross revenue (AGR).

The tower companies could consider payment holidays for the two telcos for the first three-to-six months on new sites or do away with the lock-in period for new tenancies, industry officials said.

The government approved a two-year moratorium on payment for spectrum won in auctions, giving immediate relief of Rs 42,000 crore to Vodafone Idea, Airtel and Reliance Jio Infocomm. However, the lack of relief on Rs 89,000 crore of AGR dues for Airtel and Vodafone Idea in the government’s decisions on Wednesday was a big setback, they said.


“Due to M&As in the sector and no relief on AGR, the impact on tower companies persists,” said TR Dua, director general of the Tower and Infrastructure Providers Association (TAIPA). “Once the issue surrounding the AGR is clear, we may have further discussions with the operators to revisit the existing contracts, if required.”

A senior official in one of the telcos said that if one operator shuts down, the impact on a tower company’s revenue would be about Rs 10,000 crore annually.

“With the relief package as announced by the finance minister based on the Cabinet approval, the cash flow of operators may improve. However, without any relief on AGR payments, there will certainly be some impact on the tower companies and further investments in infrastructure,” said Dua.
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TAIPA represents India’s major tower companies including Indus Towers, Bharti Infratel and American Tower Corp., which count loss-making Vodafone Idea and Airtel as their main clients. Bharti Infratel is owned by Bharti Airtel. Indus Towers is a joint venture between entities of Bharti Group and Vodafone Idea.

Some of the master service agreements (MSA) between tower companies and telcos, which include rentals and exit clauses and are typically valid for 5-10 years, may be reviewed and renegotiated if Vodafone Idea and Airtel don’t get any substantial relief on their AGR dues.

“The chances of any potential reviews happening would be stronger for existing MSAs close to expiry as opposed to those having significant remainder validity periods,” said a senior tower industry executive.

ATC, Vodafone Idea, Bharti Airtel and Indus Towers did not respond to ET’s queries, while Bharti Infratel declined to comment.
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Some experts said that although Airtel and Vodafone Idea will not reduce their expenses for 4G expansion, payment terms between telcos and tower companies can be revisited.

Each new tenancy typically “comes with a five-year lock-in, as in entailing committed payment. That can be waived or reduced in desperate times,” said Syed Safawi, a telecom sector veteran and ex-CEO of Viom Networks.
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Bharti Infratel shares gained 0.3% to Rs 241.80 at the close on the BSE on Thursday, a day after the government cleared the moratorium on spectrum payments. The company’s stock has fallen almost 7% year to date.
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