'Vodafone Idea will bounce back despite AGR stress'

Vodafone Idea will bounce back despite AGR stress, says Bharti Infratel

Telecom infrastructure company Bharti Infratel on Friday said it believes that Vodafone Idea will bounce back, and the entity "will be around" despite the stress faced by the operator on account of statutory dues.

In an earnings call, Akhil Gupta, Chairman of Bharti Infratel, also said the company believes in returning surplus to shareholders be it by way of dividend or buyback, and while it has used the dividend route, the firm is open to considering buyback, in case there is any scope.

"Since we do give…dividend I don't think we have too much scope for buyback but if ever there would be, we would actively consider it…I will ask my tax people if they feel buyback is a better option, we have no problem. Our theory is whatever is extra, we would like to return to shareholders be it by way of dividend or buyback. We will have a look at it," he said.

Vodafone Idea – supported by strong partners like Vodafone and Birla Group -- has been "a great company and a great customer", he added.

"Vodafone Idea consists of two great partners Vodafone and Birla Group and therefore we have no reason to believe the worst. Government has already indicated -- I won't say declared because that has to be approved by Supreme Court -- but they have indicated that they are willing to give 20 years as per reports and therefore I do believe that this entity will be around… surely they would be under some financial stress because of this AGR demand, interest and penalty," Gupta said.

The chairman said that while he would not like to comment on what would be the response of Vodafone Idea on the AGR issue, he firmly believes that the company will be around.

"I can't comment what would be their response. One could be that they decide to regroup and say we are going to recalibrate our network. Second is they decide to go full stream and carry on like they were, with more capital being put in…it is something we will have to wait and see, but I am very confident they would be there.

"They would not only survive but over a period of time, being a fine company, they will come up and they will bounce back," Gupta added.

He was responding to a question on how Bharti Infratel is approaching Indus merger talks in the backdrop of issues faced by Vodafone Idea.

Announcing its results for Q4 and FY20 on Thursday, Bharti Infratel said it has extended the deadline for merger with Indus Towers by two more months to June 24.

Bharti Infratel holds 42 per cent stake in the mobile tower firm Indus Towers, which is a three-way joint venture with British telecom giant Vodafone and Vodafone Idea having 42 per cent and 11.15 per cent stake, respectively.

"….So when we look at the discussions within us we do take into account that they are going to be there and it is a great company, a great customer for us…as a tower company and that is how we look at them," Gupta said.

He acknowledged that all telecom operators, not just Vodafone Idea, were facing stress because of the AGR, but added, "I don't think that warrants something to write them off and that is why we are looking at this merger like we were doing".

He admitted that the impending merger has been an overhang on the company but indicated that the matter will be decided one way or the other, in the next two months.

"…with a fair degree of confidence I can say that this would be last final extension and within this two month period…this thing will be decided one way or the other. Hopefully, we should be able to complete the merger," he said.

Bharti Infratel believes that the outlook is constructive in the backdrop of rising demand and improvement in tariffs.

"…with expected introduction of new technologies like 5G in coming years and need for better connected nation in the post-COVID world, you can only expect role of passive infrastructure players like us to intensify," he said. 

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