Vodafone Idea's validity period for OCD issuance to ATC Telecom lapses

Debt-ridden Vodafone Idea's proposal to issue Rs 1,600-crore debentures to mobile tower vendor ATC Telecom Infrastructure has lapsed in absence of any response from the government on the conversion of interest dues into equity, the telecom operator said on Tuesday.

Last month, shareholders of debt-ridden Vodafone Idea (VIL) approved issuing optionally convertible debentures (OCD) worth Rs 1,600 crore to ATC Telecom Infrastructure on a preferential basis to settle dues of the infrastructure vendor by converting the due amount into equity, if the amount remained unpaid in 18 months.

The OCD issue for ATC was subject to certain conditions including the approval of the government.

VIL was of the view that by the time of issuing OCDs, the government would have converted the interest from deferment of adjusted gross revenue and spectrum dues owed by the company into equity.

"As the Company has not received any communication from the Government of India on such conversion, the issuance of OCDs to ATC has not been completed, within the validity period of the shareholders' resolution ie 15 days from the date of passing of the resolution. Accordingly, the shareholders' resolution has lapsed," VIL said in a regulatory filing.

VIL said that it is in discussion with American Tower Corporations for the extension of the agreement and fresh shareholders' approval will be sought as required.

The government has given telecom operators an option of paying the interest in deferred spectrum installments and AGR dues by way of conversion into equity of the NPV of such interest amount.

VIL has opted for converting about Rs 16,000 crore of interest liability payable to the government into equity, which will amount to around a 33 per cent stake in the company while promoters' holding will come down to 50 per cent from 74.99 per cent.

VIL has offered a stake to the government at a par value of Rs 10 per share and the government is waiting for the company's shares to stabilise at Rs 10 apiece.

The shares of VIL closed at Rs 8.07, down by 1.22 per cent compared to the previous close, at BSE on Tuesday.

During the September 2022 quarter, ATC's largest customer in India VIL indicated that it would make a partial payment of its contractual amounts owed to the company under tenant leases for the remainder of 2022, including amounts owed for the three months ended September 30, 2022.

During the September quarter, the shortfall in payments from VIL to ATC totalled approximately USD 48 million (about Rs 392 crore).

ATC has said that it expects to defer recognition of a similar amount for the three months ended December 31, 2022, pending resolution.

VIL has communicated its intent to fulfil the full amount of its contractual obligations commencing January 1, 2023, but ATC is uncertain if the debt-ridden telecom operator will be able to honour the same.

As on September 30 this year, the company's total gross debt, excluding lease liabilities and including interest accrued but not due, stood at Rs 2,20,320 crore.