Vodafone Idea’s Softer Payment Terms Trust Indus Towers

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Indus Towers accepted Vodafone Idea’s (Vi) suggestion for looser payment terms in the September quarter to pay off debt. Under the revised payment terms, Vodafone Idea will pay 100% of amounts billed after December 31 and part of monthly billing until that date. Vodafone Idea will pay the remaining balance due as of December 31 between January and July 2023.

Positive about the new payment plan with Vodafone Idea

Indus Towers is confident in the revised payment plan after accepting Vodafone Idea’s request for easier payment terms. Based on the payment arrangement, the tower company advised investors on its post-quarter earnings call that it expects trade receivables to decline from January.

Given the government’s recent announcement of a telecommunications reform package, Vodafone Idea’s participation in the 5G auction and the company’s continued investment in its network, it is certain that one of its most large customers would be able to repay all outstanding debts. Indus Towers expressed confidence in Vodafone Idea’s ability to repay outstanding debts during the call due to the telecom operator’s suggestion that it will soon finalize its fundraising plan.

However, the company hid information about Vodafone Idea’s unpaid debts. Vodafone Idea leases several towers and rooftop locations from Indus Towers to operate its network. The company had total trade receivables of Rs 6,499 crore at the end of September, compared to Rs 6,250 crore at the end of June. Indus Towers management has said its current priority is to settle its debts in cash.

Due to difficulties in collecting payments from its customers, Indus Towers experienced cash flow problems. During the September quarter, its cash flow from operations declined by 39% year-on-year to Rs 1,277 crore. The company also made a provision for bad debts totaling Rs 1,771 crore during the quarter, which also impacted its net profit from July to September.

With the exception of financial difficulties, the company is optimistic about the 5G opportunity and sees a significant increase in revenue potential due to increased traffic at current tower sites, demand for more tower sites light weights and the requirement for 5G standalone sites as 5G usage increases.

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