Vodafone Idea approves debentures worth Rs 1,600 crore to ATC Telecom Infra

Crisis-ridden telco Vodafone Idea on Tuesday said its board has approved an issue of optionally convertible debentures of up to Rs 1,600 crore to vendor American Tower Corporation.

After a meeting of the board of directors, the company in a regulatory filing said that it will convene an extraordinary general meeting on February 25 to seek shareholders' nod for the same.

"The Board of Directors of Vodafone Idea Limited...has again approved Preferential Issuance of up to 16000 Indian Rupee denominated optionally convertible, unsecured, unrated and unlisted debentures...aggregating up to Rs 1,600 crores, convertible into equity shares at a conversion price of Rs 10 per equity share, to ATC," the filing said.

The fresh approval was necessitated as the nod granted by the shareholders had lapsed.

"The funds so raised shall be used to pay amounts owed by the Company to ATC under the master lease agreements and, to the extent of the remainder, for general corporate purposes of the Company," the filing said.

The shareholders' nod granted on November 21 to issue OCD within 15 days of approval of the proposal had lapsed in the absence of any response from the government on the conversion of interest dues into equity.

The VIL shareholders approved issuing OCDs 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.

The government has given telecom operators an option of paying the interest in deferred spectrum instalments and AGR dues by way of conversion into equity of the NPV (Net present value) of such interest amount.

VIL has opted for converting about Rs 16,000 crore of interest liability payable to the government into equity, 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.

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.

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

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.