1. Debt trap: GTL Infra’s revival depends on 3G, 4G auction

Debt trap: GTL Infra’s revival depends on 3G, 4G auction

With a net debt of nearly R5000 crore and its deal with Aircel gone awry, the telecom tower firm is looking to find a way out of the mess

By: | Updated: December 29, 2014 6:25 AM

Beleaguered telecom tower company GTL Infrastructure will be banking on the upcoming auction of spectrum and accelerated rollout of 3G and 4G telecom services in India, more than any of its peers, to bring it out of the woods.

The debt-laden company, led by Manoj Tirodkar, has an asset base of around 30,000 telecom towers, which are proving to be a liability for it. In the half year ended September 30, GTL Infra reported a net loss of R551.24 crore, almost equal to its revenues of R579 crore during the period. It accumulated losses at the end of FY14 stood at R1,831.13 crore, according to Capitaline, a corporate and financial data mining firm.

Investors have been dumping GTL Infra’s stock and the company has lost around 94% of its market value from December 2010 till date. The company had a net debt of nearly R5,000 crore as on September 30 and has gone for corporate debt restructuring.

Various strategies contemplated by the company to monetise non-core assets to pare debt are yet to materialise, while holders of the foreign currency convertible bonds issued by it are converting small portions of their debt into equity in every quarter, reducing the promoters’ holding in the company further.

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In 2010, GTL Infra entered into an agreement with Aircel to acquire 17,400 towers  for R8,062 crore. Aircel also agreed to take 20,000 slots on GTL Infra’s tower network on lease.  But after investigations into alleged wrongdoings by the erstwhile government in allocating 2G spectrum to telcos concluded, the Supreme Court cancelled 122 licences, including some awarded to Aircel. Simultaneously, slow offtake in demand for 3G services and a price war among Indian telcos took a toll on their earnings and derailed growth plans. Aircel also reduced its footprint in many of its service areas. At GTL’s annual general meeting in September, Tirodkar told shareholders that had the deal with Aircel materialised, it would have earned around R17,000 crore in revenues between 2010 and 2015. Instead, it is forced to recognise provisions on account of doubtful debt on account of advances made to vendors related with the transaction.

But an uptake in demand for data services, along with the entry of players like Reliance Jio Infocomm, which will soon roll out 4G broadband wireless services in India, may help GTL Infra improve its topline and attract an investor it desperately needs. In September, GTL Infra signed a telecom tower sharing deal with the Mukesh Ambani-led Reliance Jio Infocomm, which is following an asset-light strategy while rolling out its services. The government will be auctioning spectrum in the 900, 1800 and 2100 MHz frequencies in February and, depending on the outcome of the auction, some of the telcos may look to expand in areas where they are not present yet, opening up a potential business opportunity for GTL Infra.

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