Indus Towers agreed to Vodafone Idea's (Vi) suggestion for softer payment terms in the September quarter in order to pay off its debts. According to the revised payment terms, Vodafone Idea will pay 100% of the sums billed after December 31 and a portion of the monthly billing up until that point. 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 agreeing with Vodafone Idea's request for easier payment terms. On the basis of the payment arrangement, the towers firm informed investors during its post-quarter earnings call that it anticipates a decrease in trade receivables starting January.
Given the government's recent announcement of a telecom reform package, Vodafone Idea's participation in the 5G auctions, and the company's ongoing investments in its network, it is certain that one of its biggest clients would be able to pay off any outstanding debts. Indus Towers expressed confidence in Vodafone Idea's ability to pay back outstanding debts during the call because of the telecom operator's suggestion that it will soon finalise its fundraising plan.
However, the company withheld information on Vodafone Idea's unpaid debts. Vodafone Idea leases multiple 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, up from Rs 6,250 crore at the end of June. The management of Indus Towers said that its current priority is on settling debts in cash.
Due to difficulties in collecting payments from its clients, Indus Towers has been experiencing cash flow problems. In the September quarter, its operating cash flows decreased 39% year over year to Rs 1,277 crore. The company also made a provision for doubtful debts totalling Rs 1,771 crore during the quarter, which also had an impact on its net earnings for July to September.
With the exception of the financial difficulties, the company is optimistic about the 5G opportunity and sees a significant increase in revenue potential as a result of increased traffic on the current tower sites, demand for leaner tower sites, and the requirement for 5G standalone sites as 5G usage grows.