Indus Towers Ltd
NSE:INDUSTOWER
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Indus Towers Ltd
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Good afternoon, ladies and gentlemen. I'm Vandana, the moderator for this conference. Welcome to the Indus Towers Limited Second Quarter Ended September 30, 2022, Earnings Call. [Operator Instructions] In case of a natural disaster, the conference call will be culminated post an announcement.
Present with us on the call today is the senior leadership team of Indus Towers, Mr. Tejinder Kalra, COO; Mr. Vikas Poddar, CFO; and Mr. Dheeraj Agarwal, Head, Investor Relations. Before I hand over the call, I must remind you that the overview and discussions today may include certain forward-looking statements that must be viewed in conjunction with the risks that we face.
I now hand over the call to our first speaker of the day, Mr. Tejinder Kalra. Thank you, and over to you, Mr. Kalra.
Thank you, Vandana. Good afternoon, everyone, and a very warm welcome to all of you.
I hope all of you guys had a great Diwali. Thank you for joining us on the earnings call of Indus Towers for the quarter ended September 30, 2022. Joining me today are my colleagues, Mr. Vikas Poddar, CFO; and Mr. Dheeraj Agarwal, Head, Investor Relations. You all must be aware that following Bimal's exit, myself and Vikas are jointly responsible for the functioning of the company till such time a permanent replacement is put in place. The Board is evaluating all talent options, and we'll make an announcement soon once the right successor is finalized.
Before I begin our agenda today, I would like to reiterate Indus Towers' commitment to work towards government's digital inclusion goals by enabling connectivity across the nation. Our team of brave hearts with their commitment and dedication is the main driving force behind our achievements as we continue to deploy towers in the most remote areas with diverse topographies to bring connectivity. During the quarter, we installed towers in the remote locations such as border areas in J&K, Namsai area of Arunachal Pradesh, Thirthahalli in Karnataka, thus enabling Internet and mobile connectivity in these areas. At the same time, we also braved severe floods and heavy rains in several areas during the quarter, and yet our field force was unwavering in their commitment towards maintaining the network. We remain steadfast in our results to continue our efforts in the future as well.
Now moving on to the key themes I would like to discuss today, I'll start with major industry developments. The government continues to take steps to simplify and accelerate the deployment of telecom infrastructure in the country in order to facilitate strict rollout of 5G services. The launch of Gati Shaktis and chat portal has eased the right-of-way application process through a single window. This significantly eases the site acquisition process and leads to a much faster creation of 5G infrastructure in the country. This is indeed a great positive step.
Now from a 5G rollout perspective, I would like to highlight the successful auction of 5G spectrum in August, followed by the start of 5G services in less than 3 months. The 2 main operators have already announced pan-India rollout of their 5G services in the next 18 months. This shows the commitment of the government and the telecom industry towards making 5G a reality soon across the country. It also underlines the role of infrastructure players in providing 5G-ready sites at speed. And Indus Towers is already progressing well on this path of preparing its size for 5G implementation.
In terms of the opportunity, we expect initial benefits to be in the form of revenue from additional loading. This will need more -- there will be need for more capacity with increase in adoption of 5G services, which will eventually drive the demand for setting up more new sites. Now taking cues from the global 5G adoption, the trend remains encouraging. As per the statistics mentioned in the Ericsson Mobility Report, global 5G subscriptions grew by 70 million in the June quarter to 690 million and are expected to reach around 4.4 billion by the end of 2027. Additionally, the number of commercial 5G service providers also increased from 210 in March 2022 to 218 in June 2022. The report also estimates that 5G penetration in India will reach 40% to about 500 million subscriptions by 2027, as we also highlighted in our previous earnings call.
The data consumption story in India also continues to be robust and 5G network rollout will further the adoption, and this is going to increase the data momentum growth even further. The total data consumed across the top 3 operators combined grew by 20% year-on-year in the June quarter. The average data consumed per user per month across the top 3 operators stood at more than 19 GB for the quarter, interpreting a year-on-year growth of over 19%. As per industry observers, Ericsson and Nokia, India's data usage is almost the highest in the world, and the average data consumption per user per month is expected to increase to about 40 to 50 GB in the next 5 years. The constantly growing demand for data and upgradation to 4G and 5G should continue to drive the demand for capacity addition, both in the form of loading and new sites, which remains a primary growth driver for Indus Towers.
From an operational performance perspective, we witnessed a healthy growth in addition of macro and leaner towers. During the quarter, we registered a net addition of 1,452 macro towers and 1,746 corresponding colocations. Our total towers and colocations at the end of Q2 was 187,926 and 338,128 colocations, respectively, each growing by 2.4% and 1.7% on a year-on-year basis. Our industry-leading tenancy ratio was largely flattish at 1.80. In addition to macro towers, we also added 1,535 colocations on leaner towers in Q2 compared to 1,021 colocations in Q1. As highlighted in our previous calls, we continue to see good traction in our leaner towers. We expect the demand for leaner structures to grow further with the increase in densification requirement and subsequently, our leaner structure portfolio to contribute meaningfully to our business performance.
I would also like to move now to the ESG, which is one of our key priorities as a responsible organization. Our efforts are directed towards identifying and targeting material points in environmental, social and governance dimensions, which will help the company in its sustainability journey. I'm pleased to share with you that we have identified key points across dimensions and finalize the targets. We have also finalized the implementation road map to achieve these targets and started working on it. In the upcoming quarters, we would be sharing progress on all these targets.
I would now request Vikas to take you through the operational and financial performance of the quarter ending September 30, 2022, and I look forward to your questions. Over to Vikas. Thank you.
Thank you, Tejinder, and a very good afternoon to all the participants on this call.
So I'm pleased to share with you the financial results of the second quarter ended 30th September 2022. Before I go to the financials, let me spend a minute on our operational performance, wherein we have seen a pickup in our tower and colocation additions in quarter 2, as Tejinder mentioned. We closed the quarter with a total tower and colocation count at 187,926 and 338,128, respectively, each growing at 2.4% and 1.7% on a year-on-year basis and 0.8% and 0.5% on a quarter-on-quarter basis. Over and above, the net addition of 1,746 colocations on macro towers, we've also added 1,535 colocations on lean towers. And as we have highlighted in the past, demand for leaner structures is rising based on the customer requirement for densification.
Moving on to the financial performance. Our reported revenues grew by 15.9% year-on-year to INR 79.7 billion, wherein the core revenue from rental were up by 12.5% year-on-year to INR 47.8 billion. Our revenues include the impact of both the tapering of exit revenues, and as shared by us earlier, the company has settled its old dues with its customers and deferred the recognition of the revenues arising out of such settlements since the time of ultimate collection.
A part of revenue from this settlement was recognized in Q4 of last fiscal based on the payment received as we had highlighted in our commentary for Q4. In quarter 2 of FY '23, the impact of deferred recognition on gross earnings and core revenues was INR 11 billion and INR 5.5 billion, respectively. Adjusted for both the exit revenue and the impact of deferred recognition, our gross revenue and core revenues grew by 2.1% and 3.5%, respectively, year-on-year. On a quarter-on-quarter basis, our reported gross revenues and core revenues from rentals grew by 15.5% and 13.3%, respectively. Again, after adjusting for the aforementioned 2 factors, gross revenue and core were up 1.4% and 2.3%, respectively.
Reported EBITDA was down 22.7% year-on-year and 21.1% quarter-on-quarter to INR 28.1 billion. Our EBITDA margin declined 17.6 percentage points year-on-year and increased 1.6 percentage points quarter-on-quarter to 35.3%. EBITDA was impacted due to increase in provision for doubtful debt, which is accounted under other expenses, as we explained in the last quarter's earnings call. In this quarter, we have made a provision for doubtful debt of INR 17.7 billion. This number appears high as part of the payments received during the quarter was towards settlement of past issues, which otherwise would have been received against the receivables outstanding, thus resulting in lower provision for doubtful debt by about INR 11 billion. Adjusted for the impact of one-off items like the lower exit revenue, the provision for doubtful debts and deferred recognition, EBITDA was up 1.1% year-on-year and 2.1% quarter-on-quarter.
Our reported energy margins were at 14.6% in quarter 2. The energy margins were also impacted due to deferred recognition. We continue to drive sharp focus on optimizing energy costs by keeping appropriate measures, especially towards reducing diesel consumption.
Our reported profit after tax declined by 44.1% year-on-year and grew by 82.7% quarter-on-quarter to INR 8.7 billion. Adjusted for one-off items, our profit after tax was down 3.5% year-on-year and up 6.4% on a quarter-on-quarter basis. Our cash flow from operating activities for the quarter stood at INR 11.2 billion in quarter 2 of fiscal 2023 compared to INR 19.4 billion in quarter 2 of last fiscal 2022. Our free cash flow for the quarter was at minus INR 4.7 billion, which was impacted by the collection challenges we currently face and also the higher CapEx cash flows during the quarter. Our reported pretax return on capital employed and post-tax return on equity for the past 12 months were lower on both year-on-year and quarter-on-quarter basis at 19.2% and 24.2%, respectively, again, impacted by the provision for doubtful debts.
Next, I would like to provide an update on the receivable situation. Our reported trade receivables increased by INR 2.5 billion during the quarter. Adjusted for the provision for doubtful debt and the payment received towards settlement of past issues, our receivables increased by INR 9.4 billion. We are closely engaged on this matter and working towards the payment plan, whereby the customer has a need to pay a substantial part of the billed amount till December 2022 and 100% thereafter. It would also clear all the settlements outstanding due as on 31st December 2022 between January 2023 and July 2023. We continue to work on improving our receivable position and keeping close eye on the situation.
In summary, our strong operational performance during the quarter is quite encouraging from the demand standpoint. Our financials continue to be impacted by the collection challenges we faced from one of our customers. With the 5G rollouts already in motion, we've been optimistic and prepared for the opportunities presented to the telecom infrastructure space as a whole.
I will now request the moderator to open the floor for questions and answers, please. Thank you.
[Operator Instructions] The first question comes from Mr. Kunal Vora from BNP Paribas from Mumbai.
My first question is on the dues receivables. So Vodafone Idea has offered convertible debentures to American Tower. Have you considered that as an option? And how comfortable would you be in receiving payment other than cash?
So thank you, Kunal. Thank you for the question. So we are aware of the developments that have happened with our competitor. I think for us, we haven't really considered this as an option. We already have a payment plan agreed with the customers, which we already shared. So we would really want to see that payment plan sort of materializing. And so far, we haven't really considered any option of convertible debentures.
What gives you the confidence that this payment plan can be like we will be able to make the payment?
Well, the confidence is basically from the fact that there have been positive developments. I mean, a couple of months back, we have seen the reform package. We've also seen government support to the sector. Apart from that, we've also seen the customer participating in the 5G auctions and still investing in the market. So we are quite closely engaged and monitoring the situation. Of course, they have also sort of indicated that they are working on the funding plan, and they are sort of close to finalizing that as well. So I think we are watching the situation closely, and we are seeing improvement. Hopefully, we will see the payment plan sort of materializing as I said.
My second and last question. I wanted to understand how you're looking at the revenues coming in from the 5G rollout. So the operators would have talked about rolling out almost pan India 5G by end of FY '24. So how should we expect your revenues over the next few quarters? Would you see any lift from 5G rollouts? And would it be front-loaded or will it be back-end loaded?
So Kunal, thanks for the question. And from a 5G perspective, as we've said earlier, the initial revenue from 5G is going to come in from loading of 5G equipment on the existing sites. And that's the trend we are currently seeing from the orders that we have received from the customers. We already are doing RFIs around those sites and the revenue realization will eventually build up. Like the same way, as we have seen on the 4G side, stand-alone 5G sites eventually will come, but that looks to be some time away or a few quarters away. And once the data traffic on the 5G network continues to build up, so in order to build for capacity and for any coverage of hot spots, there may be a need of stand-alone sites initially, and then eventually those 5G stand-alone sites will also come. So we see a positive development on our revenue in the next quarter, once the loading builds up on the existing sites and then as in after about 1.5 years or so, some more stand-alone 5G sites coming up as well.
The next question comes from Mr. Tanay Shah from Dolat Capital, Mumbai.
My first question is regarding the recent the NCD range of INR 2,000 crores. Can you give us a color as to the purpose for which the fund will be used?
Yes. So I think, first of all, this is driven by one of the requirements that we have from the regulator wherein Indus is classified as a large corporate. And we are required to comply with the provision of raising minimum 25% of our incremental long-term borrowing by way of debt security. So as per that circular, we are really expected to comply with the provision. And our NCD issuance of INR 2,000 crores, we have basically taken approval from the Board, and we would be issuing the NCDs in tranches in order to comply. So this was basically a regulation that was applicable on a block of 2 years starting FY '22. So FY '23 is our second year wherein we need to comply. And then even subsequently, the same regulation would still be applicable in '24 and '25. So we will be issuing tranches as and when necessary. And the usage of the fund is concerned, of course, we will be using this towards our investment and growth. And obviously, you can see the rollout activities picking up. So we will certainly need the funding for our CapEx.
Sure. Fair enough. And second question is regarding the -- therefore, revenue recognition, is that part -- can you just clarify it was INR 11 billion and INR 5.5 billion, right? You said in the opening remarks?
Yes INR 11 billion of -- we had a deferred recognition of INR 11 billion in our total revenues and INR 5.5 billion in our core service revenue. So INR 5.5 billion is, of course, part of the INR 11 billion.
[Operator Instructions] The next question comes from Ms. Falguni Dutta from Jet Age Securities Private Limited from Kolkata.
I just have one basic question. The revenue that we mentioned, revenue from rentals was INR 4,780 crores for the quarter. And the gross revenue is INR 7,960 crores. So what comprises the difference, sir?
So basically, within our revenue, our gross revenue, we have 2 sources. So one is the rental that we earn from our towers. And then we also have our energy revenue, which is largely coming from the pass-through of the energy cost that we bill to our customers. So the difference, just to make it simple for you, Falguni, the difference between the 2 lines is the energy revenue.
So the energy revenue would mean the cost that we incur is just a breakup of the revenue between cost and the net that we get to understand it correctly because the energy cost is the cost we would be incurring, which we are passing on to the consumers. So one is that and the other is the net rental composition, if you were to understand the gross revenue breakup. Is that correct?
That's right. Yes.
The next question comes from Mr. Pranav Kshatriya from Nuvama, Mumbai.
I'm just trying to get a sense on the realization. So we have seen the realization coming to around INR 47,000 thereabouts for the past 2 quarters. If I address for that one of the onetime revenue. Should we take this as the base revenue and subsequently the rent revenue for tenancy to grow from here? Or there will be some impact of renegotiation happening as and when those tenancies complete their tenure before. And hence, we might see the renegotiation impact going on. Just trying to get a sense on that.
Yes. So Pranav, let me put it this way. The average revenue per tenancy of INR 47,000 that you see is obviously overstated because of the deferred recognition. We also mentioned in our previous calls that this also reflects the renewal discount that we have already agreed with our customers that is roughly INR 500 per tenancy from an overall portfolio perspective. So that's also baked in the numbers. Coming to the deferred recognition and the sort of jump that we see in the average revenue, I think that's pretty much come to an end, and we have received all the payments pertaining to those settlements. So going forward, our average revenue should get back to much more normal levels.
And as far as the future renewals are concerned, like we have shared in our previous calls, this renewal discussion and agreement that we have reached is a very good reference point is a very good sort of benchmark for all future renewals, and we don't expect anything -- any major change to happen. So any future renewal coming up in the subsequent years will also be pretty much on the same line. And to that extent, we will see some movement. So there is basically growth coming from 5G loading and so on, which will obviously take our average revenues up. And there will be in future maybe renewals and things like that. So it will be a mix of a couple of things. Does that answer your question, Pranav?
It does. And my second question would be on how should we see the energy margin trending? Is there any renegotiation or things happening on that front?
I will probably just touch upon this energy margin, and then I will maybe request Tejinder to also add a color from an operations perspective. So energy margin in this quarter, of course, is very positive because of the deferred recognition. We continue to be on a pass-through model with our customers. And like I've always said in the past, ARPU means no gain, no loss. But because we have usually some difference arising because of the actual cost and the expected cost. And by the way, these actual costs or expected cost can vary because of several factors that we face in our business.
There could be seasonality, there could be high diesel consumption sometimes due to weather disturbances, there could be timing differences in electricity bills and so on. So we do face these gaps and that really causes the energy margin to fluctuate. We are trying our best to sort of drive a reduction in diesel, which will obviously have a huge bearing on these gaps. And further, I think you heard Tejinder talking about the ESG initiatives. So even our ESG initiatives and all the focus on the operational efficiencies would help us in sort of bringing this under control going forward. Anything you want to add, Tejinder.
No, you largely covered it, Vikas. And Pranav, I think this energy margin, as Vikas rightly said, this is a function of the actual costs incurred versus the expected cost at the operator side. And there could be variations at times given the better disturbances, which we continue to face. The sites need obviously 24x7 operations and if the EB availability at the sites is not consistent throughout, you need to resort to the diesel generating sets, and therefore, the diesel consumption during bad weather time and long EB outages tends to fluctuate, and therefore, the expected cost versus the actual costs vary. This leads into some kind of reconciliation challenges with the customer as well and which ultimately -- which gets ironed out over time, but reflects the quarterly outcome. So broadly, that's where we are. But we are obviously on a continuous journey towards reducing diesel as much as we possibly can through a lot of diesel replacement solutions. And also EB continues to improve year-on-year, which obviously helps towards the ESG initiatives that we will follow as a result of it.
[Operator Instructions] The next question comes from Mr. Rakesh Sethia from HDFC Mutual Fund, Mumbai.
Can you help us understand, based on your initial discussion, how large is the 5G rollout for you guys? I mean, how should I think about it? What percent of the sites or what percent of the colocation probably would have low lean take in the next 12 to 18 months, if you can share some of details around that? And secondly, would it be possible for us to quantify ballpark what kind of a revenue upside are we looking from the 5G loading?
Thanks for the question, Rakesh. See, typically, the way we have seen this technology shift rollout happening, the operators, over a period of time, will tend to cover 5G on all the sites they have with us or they have in the network. We have seen this already happening in the 4G space. So 100% of the operator sites have 4G rolled out on them. And this has obviously taken a long while. And now they are beginning to set up standalone 4G flights as well. So over a period of time, I think the 5G curve follows a similar pattern.
We already have seen good amount of orders coming in from the operators. The announced position from the operators is that within 18 months, starting from September end, they want to actually cover out almost 500 towns in the country, which would largely cover the entire coverage area that they have. So I would expect a good percentage of the price already being deployed with 5G. And then as the capacity builds up on these sites and data consumption scales up, they would possibly then be coming up new 5G sites else stand-alone 5G sites as well. But this will take, as I said earlier, a little bit more time beyond the 18-month period of rollout that we are talking about.
As for the extent of loading that one can expect, I mean we have already indicated in the previous call that we expect the 5G loading revenue to be higher than the 4G revenue level that we are seeing. This is largely because of the higher power loading that is coming on to the sites and in the operators because they have chosen sub-gigahertz frequency, some loading from the additional antennas because 700 gigahertz would need a separate set of antennas in some cases. So that kind of antenna loading that will come on the sites as well. So a substantially higher loading compared to the 4G loading that we already have would come as the 5G loading revenue builds up.
Okay. On the first part, would it be possible to quantify the discussion -- on your initial discussion what percentage of the sites you're talking about? I mean I understand that eventually 100% of the sites is move to clearly like it happened in the 4G. What I'm just trying to understand what's the sort of the main plan. But even I'm asking even, of course, it can go to 500 towns. But what percentage of the town, I mean, operators would always have a choice, right? I mean they can go to suburban, they may not need to be pricing on entire town in one go. So I'm just trying to understand it from a near-term perspective, let's say, over the next 12, 18 months, are we talking about 100% would be 5G sites? Are we talking about a problem section of the sites and any visibility you have around the same base on your initial discussion with the operators?
See, obviously, the operators are also yet finalizing the overall plan. But from the initial understanding that we get from them over an 18-month window, my understanding is anywhere in the facility of about 50% to 60% of the sites they may be covering -- the operators may be coming, I'll not be able to give you any greater specific details, but that's largely looking to be the plan if operators are talking about 500-odd towns, then that would be the minimum they would need to do.
Secondly, on the loading quantitative of revenues, if you can also clarify my understanding was that some of the radios and the antennas are much lighter rate in the 5G technology. Doesn't that have any bearing the way 5G loading or the loading revenues work for us or that will not have any value?
See, while the 5G loading 5G antennas or even the integrated antennas that you have on the 5G site, yes, they are lighter in weight. But as I said, the power that we need to set up at the sites or the load -- power load of the sites is higher in case of 5G and a big chunk of the way the loading revenue is structured, there's a big component coming from the power side as well. So since that is -- the power is higher, therefore, the loading revenue will be higher. We are expecting somewhere in the facility of 5% to 10% of our average revenue to be coming from 5G overall over a period of time.
You're talking about like the one energy part of the revenue, right, when we are talking about the aggregate energy plus antennas?
No, I'm talking about the rental part of the revenue or the base revenue.
The next question comes from Mr. Ravi Agarwal from UTI AMC Limited, Mumbai.
My question is largely around the Vodafone and it's subs. So I would just try to take the questions into a couple of ways. First, can you just tell me how much of the original total receivable from Vodafone Idea before the write-off which was taken in the first quarter, the provisions which were in the first quarter? And how much is the outstanding right now after the second quarter's provision? And what is the total distributable position still outstanding from Vodafone and what is the AG? So that's the first question. And I'll come back with the second question after this.
So Ravi, unfortunately, we cannot disclose customer-wise information. So your questions regarding what is the receivable of Vodafone and how much is outstanding after the provision and aging, et cetera, unfortunately, we won't be able to answer that in specific terms.
I understand. So should we expect any further write-offs because it was mostly addressed from the previous one that no major write-offs would be coming in the next quarters or largely all the write-up has been accounted for? But now this quarter even seeing a larger provision, so how much can we expect in the next second half of the fiscal?
Yes. Let me explain, and this is a very important point, Ravi. So I think, first of all, we have already shared the payment plan that we have agreed with the customer. And after the payment plan, like I mentioned, and I would like to just sort of reinforce and reiterate that the payment plan also includes payment of the accumulated receivables in the 7 months from January 2023 and July 2023. So currently, we are providing because there is a delay and there is an aging issue. And we are basically providing in order to hedge our balance sheet and derisk the receivable situation. But I mean, based on the payment plan, currently, we are not expecting any write-off. The payment plan envisages collection of the full dues and hopefully, they will not be any write-off endorsed.
Now coming to the other point within this question that you raised, which is about the large provision in quarter 2, I would like to explain that. So while from an optic perspective, you see INR 17.7 billion for doubtful debt, but if you recall, I did explain that part of the payment that we collected where basically towards the settlement of past dues, past issues, which otherwise, if we had not settled that, then those collections would have been applied towards the outstanding receivables. And if that was the case, then our provision for doubtful debt would have been much lower. So the INR 11 billion that I mentioned, which we collected towards the past dues would have been applied towards the current dues. So to that extent, I think it's a bit technical. The real bad debt or the real provision for bad debt needs to be looked at in conjunction with both the numbers. Does that make it clear, Ravi?
Yes. So the provision towards the current receivables would be at around INR 6.7 billion. Is that correct?
Yes, if you look at it that way, yes, it would be INR 6.7 billion if we basically take the total collections in this quarter, which is certainly lower than what we had in the previous quarter.
So the previous quarter's INR 1,200 was entirely towards the -- this was nothing towards the past dues and INR 1,700 contains around INR 1,100 of the outstanding write-off from the past dues. Now the understanding is correct, the entire past receivables have now been written off, right? And from the current new billings, the payment plan will take care of that?
Yes. Sorry, just a correction, Ravi, you said the entire past receivable has been written off. It's not the case of write-off. Like I said, we don't have any write-off. What I mentioned was the cost issues have been resolved, and we had deferred the recognition till the time of ultimate collection. In this quarter, since we have collected the full amount, we have recognized. And hence, to that extent, the payment received towards our normal receivables is less.
Sure. Now coming back to the second question, what is the future accounting policy we are looking to adopt? I mean, I just wanted a clarification about the deferred revenue? And how are we looking to account for the new billings, which will be done? And plus, how would the energy charges would be directed at?
Well, as far as the accounting policies are concerned, we don't have really any change in our accounting policy. We basically had deferred the recognition, like I said, because we wanted to be sure about the collection, and that has been the policy. So there is no change. What really could change is because we are constantly reviewing and reassessing the situation, and like I said in the previous quarter, we did adopt a more stringent EPA computation and as a result, we had made a provision of doubtful debts of about INR 12 billion in the previous quarter. That was based on the stringent EPA computation, which was a bit of a change. We will keep reassessing. And in third quarter, if we feel that things are not progressing as we expect that we might adopt the most stringent approach again. But as of now, there is no change. And if there is any change, we will certainly let you know.
The next question comes from Mr. Aazeb Parbatani from Omkara Capital, Mumbai.
So my question is in terms of the Vodafone Idea. First of all, I want to ask that the payment plans which we have committed in them, which you have disclosed in the media also, have they agreed upon that? How the Vodafone Idea is -- how the management is giving answers to your basically the format which you have given to them in terms of the payment plan? And secondly, what percentage of revenue is basically constituted by the Vodafone Idea's total revenue because you have stated that you are going to stop the services will be not able to impact by the month of November or by the month of December. So can you give some brief on that also?
So Aazeb, on the first point, the payment plan is basically what the customer has proposed and that payment plan was discussed in our board, and we have sort of agreed in order to support the customer as a temporary report. As far as the percentage of revenue is concerned, I think, like I said, I'm unfortunately not able to disclose or share any customer-specific information here. So we will not be able to share what is the percentage of revenue from Vodafone.
And I think -- sorry, could you just repeat your last question, Aazeb?
Yes, my question was that what's in the top line revenue, which I think that we are not able to disclose on the call? My first question is in terms of the dividend policy looking forward, how the company is doing in FY '23 and FY '24 is in terms of the dividend announcement because you are taking off decision from the Vi from the Vodafone Idea. So how the dividend policy is going to be there in especially the FY '23?
Sorry, I think -- okay. So coming to dividend, I think our policy is very clear. The dividend is, of course, linked to our free cash flow. And we will certainly assess the free cash flow situation at the end of the year and make the decision accordingly, but we are fully committed to the policy. And currently, there is no change in the policy.
I think, Aazeb, you also mentioned about Indus stopping services. I just want to put it on record that that is purely speculation. We have not mentioned this anywhere or sort of made any such statements. So I just want to make sure that it's noted that it's purely speculation. We are working with the customer to sort of execute the payment plan and trying our best to make things normal.
And any time lines can you discuss at least you can share in the next 3 or 4 months, next 6 months, it can be sorted out at least on the call actually? You have some idea also because you do not investors are waiting for this -- so at least you can give some tentative time line less in the next 5 months, 6 months, you look in a long?
So from a time line perspective, I just want to reiterate what we shared earlier. From a time line perspective, the payment plan is getting a substantial part of our monthly billing every month till December 2022. And from January 2023, we expect 2 things to happen as per the payment plan. We expect 100% collection of the monthly billing. And whatever will be the accumulated outstanding as on 31st December 2022, our payment plan basically says that those outstandings will be cleared in a phased manner over 7 months starting January 2023 till July 2023. So I think from a time line perspective, this is the plan that we have agreed, and this is the best indicator of the current situation.
The next question comes from Mr. [ Utkarsh Mehrotra from Sanford, Singapore ].
Just one question from my side. So previously, you had some collateral, which basically helped us offset any delay in getting the amounts from one of our key counterparties. But going forward, given the fact that there's been inordinate delay in them raising capital. So in worst scenario, do we have anything similar plans going forward? Or how are we thinking about worst case scenarios in case there's further delay in them raising capital to pay us?
So Utkarsh, I think, first of all, regarding the security that we had, as we had shared earlier, the entire security was sort of restructured, and we received the money in the quarter 4 of last fiscal and also in this current quarter through the -- basically the equity injection that the promoters have done. So we received almost INR 30 billion in March and then some more funds in the month of July. So currently, our primary pledge of the security that we have had been completely monetized and that is no longer there.
Now coming to the worst-case scenario, like I said, we are closely monitoring. We are also assessing our exposure, and we will be making the right calls on the provisioning. And if our ECL competition and methodology and our practices need to be tightened, we will also adopt that in this quarter, depending on how things progress. So really, I mean, it is very difficult to predict what would be the scenario because that would be crystal gazing. So I think to a large extent, we will keep watching and by the way, the significant provisions that we have made in the last 2 quarters have already given us a very significant hedge on our balance sheet. And I think to that extent, the risk is less.
The next question comes from Mr. Arun Prasath from Spark Capital, Chennai.
Sorry, the last time, the call got disconnected. I think my question is similar to the line of other participants regarding receivables is mostly answered. But just to summarize what you are saying is that by December 2022, the receivable should peak out and then post it, it will only decrease. Is it the right understanding?
Yes. That is the expectation, Arun, based on the payment plan that we've released.
Okay. Understood. Secondly, on the leaner towers, you shared some data points this time. Can you give a little bit color on what is the cumulative leaner towers count and cumulative colo count on those leaner towers?
Yes. So I think we started reporting lean towers from previous quarter. So this quarter, like I said, it's close to 1,500. The previous quarter was 1,000. And then we also had a few sites that we rolled out in the last year. So I would say the data -- sorry, the base of lean towers is somewhere in the range of 3,000, a little over 3,000. So it's still a small number compared to our total portfolio. But this is certainly picking up, and we will see sort of this segment growing much faster in the coming quarters.
And this is not part of the total that was reported or total colocations reported, is it, right?
Yes, what we report is the macro towers. And because the segment is very small, the segment of lean is very small right now, it's not significant and hence not included in the reporting.
We do have a follow-up question from Mr. Kunal Vora from BNP Paribas, Mumbai.
So regarding the -- so you did a booking of INR 1,100 crores of past dues, of which INR 550 crores pertain to energy, and there is no additional cost which has come against that. How should we look at this? Does it mean that the cost has already been booked in the past and the energy margins which we are looking at for the past quarters, they would have been better considering this additional revenue?
Yes. So Kunal, the way it works is, I mean, whenever we have these gaps as Tejinder and I spoke about, which is the gap between what is expected and what is actual and so on. We do have these sort of deferred recognition. We defer the revenue recognition until the gap is resolved. And it had really accumulated and we resolved this. So certainly, I mean, if we were to really go back and look at each of those periods, where we had deferred the recognition, certainly, the energy margin would change slightly. So yes, you're right that the INR 5.5 billion that we're sitting in the energy revenue does not have a corresponding cost because these are basically the revenues coming from the past periods.
Similarly, like you see in last 2, 3 years, energy margins have been consistently negative. So it's possible that we could have some offset of that also in the subsequent quarters?
Well, like I said, I mean, we did sort of resolve a lot of these past issues as part of the sort of onetime settlement that we did. So I don't think we expect to really see such lump sum recognitions going forward. But of course, this gap of expected and actual obviously continues in the diesel world. So to that extent, I think some reversals will keep happening, some recognitions will keep happening, but I don't expect such large quantums going forward.
Understood. And lastly, on CapEx, any -- like, can you talk about your expectations going forward, considering that large 5G investment will be on telcos. Will that require some additional investment from your end as well?
So let me take that, Vikas. So Kunal, on 5G side, while as I've said, 5G is coming as a loading on our existing sites. It could be a combination of new investments should decide need some electrical infrastructure to be upgraded or some amounts to be put up and so on. So some sites may be already ready to receive the 5G equipment and there could be additional capacity sitting on some of those sites because we are ultimately into sharing business and some sites may already carry that capacity. But in some sites, where we are kind of already sitting at the edge from a capacity perspective, we may need to increase the electrical infrastructure, and therefore, investment to that extent, may be required for both mounting the antennas or the radio equipment on the towers some mounts, so it could be a kind of averaged out cost on the towers when one is talking about hosting the 5G equipment.
The last question comes from Mr. Vivekanand Subbaraman from AMBIT Capital, Mumbai.
I have only one question. When you spoke about the loading needs about 5G, you mentioned that the frequencies, you mentioned about 700 megahertz, you mentioned about multiple antenna requirements and power requirements. Could you highlight the differences between 4G loading and 5G loading in the context of the revenue opportunity for you as far as 5G is concerned? And why you believe that 5G will be a bigger loading opportunity for you than 4G?
Yes, Vivekanand. So see the difference between 4G and 5G in terms of the equipment or the split radios, there is none. So there is a split radio when it is coming -- if it is coming on the 5G space. In the 5G, typically, there are 2 types of equipment, when it is in the 700 megahertz space, you have separate antennas and separate radios going up similar to what you see in the 4G space. When it is in the 3.3 gigahertz space 5G solution, you have the antenna and the radio integrated. And both of them are going up on to the tower from a 5G rollout perspective. The power load of that equipment is a little higher compared to what you see on the 4G radio side. And therefore, as I said earlier, the rental revenues because loading revenue constitutes a big chunk of load and power, the way it is structured from talk perspective, because of the higher power load of these sites, the IPP from a loading perspective is higher for 5G compared to the 4G. I hope that answers your question.
So just one small follow-up. So Jio is the only one that has 700 megahertz, and they talk about carrier aggregation, so which they say that they are able to utilize all 3 bands of spectrum in tandem. So does this still entail separate antenna and loading equipment, the 700 megahertz or are they talking about some other technologies here?
The carrier aggregation is primarily combining different frequencies and different carriers to give a better output. That's primarily what carrier aggregation is. But ultimately, each spectrum frequency that needs to be fired would need a radio. If it is 700, they need 700 megahertz radios to fire the 5G 700 spectrum. And if it is 900 or 1,800 or 2,100 or 3.3, each one of them have separate radios. So radios need to be deployed at the sites. And then those different frequencies get aggregated, which is what is carrier aggregation to give a better throughput or better capacity and so on. When it comes to the antennas, I mean, there are only 2 ways, either you deploy stand-alone 2 for 700 megahertz antennas or the tower or you have multiport antennas already deployed in which 700 band is covered. That means you have a wide-band multiport antenna, which would cover from 700 to, let's say, 3,300. If that is available already at the sites, which in Jio's case, some sites they have, then they don't need to put up additional antennas otherwise, they will have to.
At this moment, I would like to hand over the call proceedings to Mr. Tejinder Kalra for the final remarks.
Thanks, Vandana.
So to sum up, our strong performance during the quarter is very encouraging, and we expect the increased demand for telecom infrastructure to continue. On the receivable front, we are constantly engaging with the customer and monitoring the situation vigilantly. We are excited about the 5G rollout scaling up across the country, which, we believe, would act as an extra leg of growth for the entire telecom industry.
Thank you all for joining the call today. Good luck to us.
Ladies and gentlemen, this concludes the conference call. You may now disconnect your lines. Thank you for connecting to audio conference service from Airtel, and have a pleasant evening.