American Tower Corp (ATC) has reported a USD 322 million goodwill impairment charge for its India unit in the quarter ending September 2023. A goodwill impairment charge occurs when the value of an asset, in this case, the India unit of ATC, decreases significantly, rendering it either worthless or of lower value on the company's balance sheet. The charge was attributed to ongoing business challenges in India. The fair value of ATC's India unit fell below its carrying amount in the September quarter.
In a filing to the US Securities and Exchange Commission (SEC) on October 26, ATC said, "The Company concluded that a 'triggering event' occurred as of September 30, 2023, with respect to its India reporting unit primarily due to indications of value received from third parties in connection with the Company's review of various strategic alternatives for its India operations, including the potential sale of equity interests in its India operations."
"As a result, the Company performed an interim quantitative goodwill impairment test as of September 30, 2023, using, among other things, the information obtained from third parties to compare the fair value of the India reporting unit to its carrying amount, including goodwill. The result of the Company's interim goodwill impairment test as of September 30, 2023, indicated that the carrying amount of the Company's India reporting unit exceeded its estimated fair value. As a result, the Company recorded a goodwill impairment charge of USD 322.0 million."
Vodafone Idea Dues
The challenges faced by ATC's India operations are largely a result of the non-payment of vendor dues by Vodafone Idea (Vi), which has been struggling to raise funds to settle its debts with network partners, including ATC Telecom Infrastructure and Nokia. In February 2023, Vi issued optionally convertible debentures (OCDs) worth Rs 1,600 crore to ATC Telecom Infrastructure against its dues, and it is estimated to owe ATC approximately Rs 2,000 crore. In August, Vodafone Idea extended the redemption period of its OCDs allotted to ATC by one year.
Carrying Values of Intangibles
Among other India-related disclosures in its SEC filing, ATC mentioned that the carrying value of tenant-related intangibles in India was USD 0.4 billion as of September 30, 2023, which represents 3 percent of the ATC's consolidated balance of USD 12.2 billion.
"Additionally, a significant reduction in customer-related cash flows in India could also impact our tower portfolio and network location intangibles. The carrying values of our tower portfolio and network location intangibles in India were USD 0.9 billion and USD 0.3 billion, respectively, as of September 30, 2023, which represent 11 percent and 8 percent of our consolidated balances of USD 8.7 billion and USD 3.3 billion, respectively," said the Boston-based telecom tower company in its SEC filing.
"The carrying value of goodwill in India was USD 0.6 billion as of September 30, 2023, which represents 4 percent of our consolidated balance of USD 12.6 billion."