Indus Towers Limited (NSE:INDUSTOWER) Q1 FY23 Earnings Concall dated Aug. 03, 2022
Corporate Participants:
N Kumar — Chairman and Independent Director
Bimal Dayal — Managing Director and Chief Executive Officer
Vikas Poddar — Chief Financial Officer
Analysts:
Pranav Kshatriya — Edelweiss Securities — Analyst
Kunal Vora — BNP Paribas — Analyst
Vivekanand Subbaraman — Ambit Capital — Analyst
Arun Prasath — Spark Capital — Analyst
Manish Ostwal — Nirmal Bang — Analyst
Praful Kumar — Dymon Asia Capital — Analyst
Varun Ahuja — Credit Suisse — Analyst
Ankit Patel — L&T Mutual Fund — Analyst
Presentation:
Operator
I’m Rajita, the moderator for this conference. Welcome to the Indus Towers Limited First Quarter Ended June 30, 2022 Earnings Call. [Operator Instructions] Present on the call today is the Chairman and Independent Director of Indus Towers, Mr. N Kumar along with the senior leadership team of Indus Towers Mr. Bimal Dayal, MD and CEO; 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 several forward-looking statements that not reviewed in conjunction with the risks that we face. I’ll now hand over the call to our first speaker of the day, Mr. N Kumar. Thank you, and over to you Mr. Kumar.
N Kumar — Chairman and Independent Director
Thank you, Rajita, and good afternoon, and a warm welcome each one of you to the earnings call of Indus Towers for the quarter ended June 30, 2022. It’s my pleasure to speak to you as it is the first time I joined you all of the earnings call of Indus Towers. As you’re all aware, the industry is at a watershed moment with the imminent rollout of the 5G services in the country. As one of the largest passive telecom infrastructure players, we are well equipped to cater to this demand and support our customers for the rollout.
I’d like to take a moment now to appreciate team for the commendable job they have done in maintaining our leadership position during difficult times too. On behalf of the Board, I’d like to thank Bimal Dayal for his contribution to the growth of Indus Towers. The last five years have indeed been tough for the industry and the quarter gone by wasn’t an easy quarter either. Bimal has successfully navigated the company through these tough times. Under his stewardship Indus has managed to scale new highs and achieve key milestones. You’re all aware we completed an impeccable merger in the middle of a pandemic. Bimal has built a culture which has made the company a Great Place to Work as recognized by the Gallup for nine years in a row. He now leads the company in great shape with a strong management team in place. I take the opportunity of wishing him the very best in all his future endeavors.
I’ll take the opportunity of hand overing of the call to Bimal to present an update on the quarter ended June ’22 and answer all queries. I will now exit the call and over to you, Bimal. Thank you.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you. Thank you very much, Mr. Kumar. Good afternoon, everyone, and thank you for joining us on the earnings call of Indus towers for the quarter ended June 30, 2022. Joining me today are my colleagues, Vikas Poddar, CFO; Mr. Dheeraj Agarwal, Head, Investor Relations. Before I begin our agenda today, I would like to take a moment to acknowledge the heroic efforts and dedication of our field force in Assam who battle the heavy rains and floods to make sure that the network does not go down. I’m immensely proud of their efforts to ensure connectivity under the challenging circumstances.
At the beginning, let me say that our business fundamentals remained stable and have improved this quarter given the recently concluded 5G auctions, the exploding data growth and the agreements on the MSA renewal framework besides our improved operational performance. I’ll touch upon each one of them one by one. Coming to the 5G auctions first, the telecom industry is at the next phase of growth as it moves closer to paving way for high-speed 5G services to public and enterprise. In line with the government’s plan to for the rapid rollout of 5G services in the country, the DoD concluded the entire auction process for 5G spectrum within a short span of time.
The changes in the reserve price and payment schedule and availability of enough spectrum was key to the successful auction which saw active participation from at least two telcos. The telcos acquired spectrum across brands including 3.3 gigahertz and 26 gigahertz band, which are important for 5G services. The Government of India has received a total bid amount of whooping INR153,173 crores with 51,235 megahertz sold out — spectrum sold out, out of the total of 72,098 megahertz spectrum on the offer. Also, this is the first time we saw the bidding on 700 megahertz as well which is a significant change from the previous auctions.
The acquisition of 5G spectrum in conjunction with government’s encouraging stand makes us feel optimistic about swift proliferation of 5G services in the country. Indus Towers is geared up to support the 5G requirements of the operators based on their rollout strategy. Well, the auctions are on one side, but there are great tailwinds in terms of 5G adoption as well. Global trends of 5G adoptions are quite positive as evidenced by the statistics mentioned in Ericsson Mobility report. As per the report, global 5G subscriptions grew by 70 million in March quarter to 620 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 200 in December ’21 to 210 by March ’22. The report also estimates that 5G penetration in India will reach 40% to 500 million subscription by 2027.
This was about the 5G story. However, the inherent demand which comes from data consumption by the large Indian customer base remains robust. The total data consumed across top three operators combined grew by a healthy 36% year-on-year in quarter four FY ’22. The average data consumed per user per month across top three operators at more than 18 GB in quarter four FY ’22, exhibiting a year-on-year growth of 30%. The rapid growth in data consumption coupled with continued migration to 4G and 5G is expected to drive the demand for passive telecom infrastructure and we are very well positioned to cater to this demand.
Another thing of immense significance to us is the MSA renewal. We are pleased to inform you that revised framework has been agreed with both our major customers. The renewal of co-locations will provide us with long-term revenue visibility from a substantial part of our portfolio for the next 10 years. As we highlighted in the last quarter, we have offered competitive rates to our customers under the revised framework. I would also — I would like to add that both customers have agreed to renew majority of their sites expiring between March ’22 and March ’23. They retain the option of existing up to 9% sites without exit charges or renewing all or part of these sites at a future date. Vikas will be sharing further details later.
From an operational performance standpoint, we had an improved quarter. During the quarter we had additional net additions of 1,027 towers and 591 co-locations. These numbers do not include addition of lean towers and corresponding co-locations. Net additions were impacted due to higher churn in co-locations at 733. Our total towers and co-locations at the end of quarter one were at 186,474 and 336,382, respectively, [Technical Issues]
Okay. Let me give it another try here. In continuation with our commentary last quarter, we have continued to see strong traction and demand for our leaner towers. During the quarter we added around 1,021 leaner towers. With the imminent roll of 5G services in the country we expect this demand to increase even further. Now, for the elephant in the room, let’s talk about the receivable situation which has been under stress for a few quarters now and we could reverse the trend in quarter four FY ’22 by restructuring the security package. This cover ended on July 15, 2022.
We continue to work with our customer to improve our receivables position, but we are all aware of how stretched their financials are. Collectively as Board members we believe that the receivables are good and recoverable. However, we have used prudent accounting practice to change ELC, thereby increasing our provision by INR1,233 crores, which has impacted our EBITDA profits etc. Vikas will further elaborate upon this.
Coming to my last point, which is my ESG agenda. We remain committed to our — in our endeavor to create a sustainable future for the company and the communities we serve. And to that end, we have been making progress in our ESG journey. We have finalized targets across dimensions of ESG with the objectives of reducing GHG emission, improving upon our waste management practices, having a more diverse employee base and prioritizing it’s well being, ensuring sustainable sourcing amongst other things. The teams are already finalizing the roadmap and initiatives towards achieving of their target. We are planning to announce our ESG targets in coming quarters.
I will now request Vikas to take you through our operational and financial performance for the quarter and look forward to your questions. Over to you, Vikas, and thank you. And apologies for the interruption.
Vikas Poddar — Chief Financial Officer
Thank you, Bimal, and a very good afternoon to all the participants on this call. I’m pleased to share with you the financial results of the first quarter ended June 30, 2022. To begin with an update on our operational performance, we closed the quarter with a total tower and co-location count at 186,474 and 336,382, respectively, each growing at 3% and 3.4% year-on-year basis and 0.6% and 0.2% quarter-on-quarter basis. In terms of the financial performance, our reported revenues were up 1.5% year-on-year to INR69 billion, while the core revenue from rentals grew 0.3% year-on-year to INR42.2 billion. The year-on-year growth numbers are impacted due to tapering of exit revenue as we had indicated in our previous call.
Adjusted for this, the gross revenues and the core revenues were up by 1.9% and 2.2%, respectively, year-on-year. On quarter-on-quarter basis, our reported gross revenues and core revenues from rentals were down 3.1% and 11%, respectively. The quarter-on-quarter growth numbers were lower mainly due to the absence of quarter four provision reversal of CIRCA INR5.5 billion. After adjusting for the provision reversal, the gross revenues were up 3.4%, while the core revenues were down 0.8% on quarter-on-quarter basis. Both the quarter-on-quarter and year-on-year numbers have also been impacted by the co-location renewals at competitive rates and terms, which I will talk about in the later part of my speech.
Reported EBITDA declined by 34.2% year-on-year and 42.9% quarter-on-quarter to INR23.2 billion. EBITDA margin was down by 18.2 percentage points year-on-year and 23.5 percentage points quarter-on-quarter to 33.7%. EBITDA numbers were lower due to a substantial increase in provision for doubtful debts which is recorded under other expenses. As per our accounting policy, when our receivables are overdue beyond a threshold, we need to make provisions for doubtful debts and we also write back or reverse those provisions as and when we are able to collect those aged receivables. We have made provision for doubtful debt of INR12.3 billion in this quarter due to delay in payment from a customer beyond the threshold period. Adjusted for exit revenue, the provision for doubtful debts and the provision reversal, EBITDA was up 2.9% year-on-year and down 0.8% quarter-on-quarter.
Our energy margins continue to be negative. Quarter one was impacted by seasonality as our diesel consumption increases during this period, which was partly offset by the lower provisions on account of revision in our estimates that we usually do in the first quarter of every year. We continue to take initiatives towards reduction in diesel consumption to minimize the energy loss. Our reported profit after tax was down by 66.3% year-on-year and 73.9% quarter-on-quarter to INR4.8 billion. Again adjusted for exit revenue, provision for doubtful debts and provision reversal, our profit after tax was up 2.9% year-on-year and down 4.7% quarter-on-quarter.
Our cash flow from operating activities for the quarter was INR18.7 billion in quarter one FY ’23 compared to INR19.6 billion in quarter one FY ’22. Our free cash flow for the quarter was at INR5.5 billion, which was impacted by the delay in payments from one of our major customers. Our reported pre-tax 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 to 22% and 29.5%, respectively.
Let me now spend time on explaining the developments on co-location renewals and receivables. On the co-location renewals I would like to inform you that we have established a renewal framework with our customers that includes a discount on prevailing these rates of the renewal portfolio to maintain our competitiveness and continued business relationship. As a result, we have secured renewal of majority of the co-locations expiring between March ’22 and March ’23 for an extended period of 10 years. The revised rates on these renewed co-locations will come into effect on their respective renewal dates, starting from April 1st of this financial year. The revised rates are estimated to result in a marginal reduction in the revenue per quarter on Ind AS 106 basis.
We believe that the financial impact of the discount would be offset by incremental revenue from future rollouts by the customer for the network expansion, the launch of 5G services and other network solutions. Moreover, securing a 10 year extension on the renewal portfolio provides a long-term certainty and visibility of core revenue.
Next, I would like to apprise you of the receivable situation. Our reported trade receivables decreased by INR8.1 billion due to provision for doubtful debt of INR12.3 billion which is accounted in the other expenses. While the customer has explained that it is closer than ever to tying up its financing needs and also considering the fact that there has been positive developments recently, including its participation in the 5G spectrum auction, we have nevertheless considered the current situation and adopted a more stringent accounting practice for making provision for doubtful debts in respect of recoverable from the customer. Adjusting for this provision, increase in trade receivables would be INR4.2 billion due to shortfall in the payment by the customer.
I would like to reiterate what Bimal said that the receipt of the payment from the customer remains challenging in the short-term. The customer has proposed a payment plan wherein they have conveyed the ability to pay part of the build amount till December ’22 and 100% thereafter along with clearance in a phased manner between January 2023 and July 2023 of the old dues that would accumulate till December 2022. We are engaged with the customer to work out a better payment plan. Hence, we expect to see gradual improvement in our trade receivables provision that we will continue to monitor very closely.
In summary, we had a mixed quarter, wherein our financials reflect a stress based on them by the collection issues from one of our major customers, we are hopeful of navigating our way through this situation, given the long-term growth story of the telecom infrastructure space remains robust.
I would now like to hand over the call back to Bimal.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you, Vikas. And happy to take questions. So, over to you all. Over to you, Rajita.
Questions and Answers:
Operator
Thank you very much sir. [Operator Instructions] The first question comes from Mr. Pranav Kshatriya from Edelweiss Securities, Mumbai. Mr. Kshatriya, you may ask your question now.
Pranav Kshatriya — Edelweiss Securities — Analyst
Thanks for the opportunity. My first question is regarding the impact of MSA renegotiation. You talked about decline in the revenue because of this. So, can you quantify how much will be the impact in terms of the rent per tenancy compared to the previous quarter, of course, adjusted for that INR5.5 billion one-off which was there. That’s my first question. And secondly, how should we see the financial impact of the exit charges for 9% of the tenancies, because I assume that they would want to execute higher basically churn out higher tenancies, will that have a revenue implications or it will have other cost implications, because you might have to close certain towers because of that so how should we see this impacting revenue/profitability? Those are my two questions and thank you.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you, Pranav. I’ll take the second one first on this 9% and the impact thereof. I think if you actually look at over a period of 10 years there have been a lot of — 10, 12 years, I would say, there has been a lot of, let’s say, scope for optimization, which has been built in into whatever we end up doing as well. So this could be the landlord rentals, this could be energy costs, etc., etc. And I think over this period there is some amount of towers, which let’s say, we would like to exit or let’s say jointly between our customers and us we would certainly like to work upon those costs as well. However, I think this number in reality would end up would be much, much lower than 9%. This is more flexibility, which is existing with the customers and us as well.
I think there are certain incentives, which let’s say, the customers had wherein the costs are higher and this actually puts a very good pressure on Tower Co. like us to bring those costs down for some amount of such towers as well and we are working with the customers. Now, we certainly would like to give you a color as to impact of this 9%. And since we have kind of close these MSAs very recently I think in coming quarters we would certainly give you the color as to whether this would be 1% or sub-1% or any other number as well. So just watch this space as well.
From a distance I can only say that no operator would like to change their grid because it impacts the customers, end customers as well and customer satisfaction for the end customers, and more importantly, it costs a good amount of money to shift these towers as well. Hence, once you take the incentive to move these towers out, which is the higher cost, I think we’ll be able to settle for a much higher number than 91%, which as I said as story develops, we would share the impact. On MSA maybe Vikas you could take us through on the impact.
Vikas Poddar — Chief Financial Officer
Yeah, sure. So, hi, Pranav. Thanks for the question on the MSA. I think as far as the impact of the competitive prices in terms that we spoke about that would be on an average roughly about INR500 per tenancy and that would translate to roughly INR900 per tower on an overall average basis.
Pranav Kshatriya — Edelweiss Securities — Analyst
Okay. And this you’re adjusting for this lease equalization or that will not have material impact because of that.
Bimal Dayal — Managing Director and Chief Executive Officer
So as far as the lean towers are concerned, this is the first time we have started reporting. As you can see,
N Kumar — Chairman and Independent Director
Question is on lease.
Bimal Dayal — Managing Director and Chief Executive Officer
I’m sorry, I didn’t get the question. So, could you repeat the question, Pranav.
Pranav Kshatriya — Edelweiss Securities — Analyst
Yeah. So, I was saying, so when you talk about the rental, there is a factor of lease equalization impacting that. So, because now the renewal has happened so the lease would be for a longer tenure. So when you say this INR500 impact on — is it on the reported revenue basis or is it adjusting for the lease equalization?
Bimal Dayal — Managing Director and Chief Executive Officer
This is adjusted for the lease accounting, because as part of the renewal we have also secured a 10-year extension, which is quite significant. So, yeah, I mean, from that perspective, this is, as I said, on an Ind AS 106 basis.
Pranav Kshatriya — Edelweiss Securities — Analyst
And if I have to see the impact on the billing basis, how much you built to the customer versus what we are billing earlier, how much will that impact be?
Bimal Dayal — Managing Director and Chief Executive Officer
Pranav unfortunately there is business sensitivity because it’s a customer specific information, which we will not be able to share because of the confidentiality.
Pranav Kshatriya — Edelweiss Securities — Analyst
Sure, sure, I understand that. Yes, sure. I have a few questions. I’ll come back in the queue. And thank you very much for that.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you, Pranav.
Operator
Thank you very much, Mr. Kshatriya. The next question comes from Mr. Kunal Vora from BNP Paribas, Mumbai. Mr. Vora, you may ask your question now.
Kunal Vora — BNP Paribas — Analyst
Yeah, thanks for the opportunity. Again, a question on MSA renewal. Any other changes in the terms such as annual escalation which you are getting which is about 2.5% at the statutory and whether there is any change in term such as loading.
Bimal Dayal — Managing Director and Chief Executive Officer
So, thanks Kunal for this question. There are no — there is no change when it comes to our annual escalation or the loading charges as well. So it remains the same.
Kunal Vora — BNP Paribas — Analyst
Okay, okay, okay. And the second is referred to the spectrum, can you run us through like what kind of upside you can see from that purely from loading not from new towers, but on loading assuming that the tenant goes for say 50,000, 100,000 sites on which to deploy 5G services, what kind of an upside would you expect from that?
Bimal Dayal — Managing Director and Chief Executive Officer
So look this also depends. And Kunal if I understand your question right, you’re actually trying to look at what kind of an impact 5G will have on Indus start with the loading charges. So, let me say, first of all, that I think operator’s strategy would vary from, let’s say, one customer to the other as well. And let’s put it this way that initial responses which we have seen, I think we will see large scale rollout of 5G on our existing sites as well and which would start almost in weeks time from here on as well. I think we’ve been working on preparing these sites for quite some time now as well. I think each one will have different radio than different antenna sets as well. However, only color I can give you is where we stand is the average loading for 5G is going to be higher from what we actually realized on 4G as well and I think for at least first year with massive rollout I think we really expect to do very well when it comes to our loading revenue on 5G. However, I think per site basis it will depend on customer to customer as well and the kind of equipment, which comes in.
Kunal Vora — BNP Paribas — Analyst
Thanks for that. And 4G, if I’m not mistaken, it used to be about 10%, is that the kind of number you indicated, like the number and 5G will be higher compared to that. So, is that the right way of looking at it?
Bimal Dayal — Managing Director and Chief Executive Officer
Look, I’m only saying it will depend from customer to customer as well. On an average, we have seen that this is higher. Now, what will the customers do to optimize this as well will actually happen when this rollout begins as well. In our trials this is what it is right now. I won’t be able to kind of substantiate this for you until the first rollout start to take place. That would be a good time to ask this question. But my take from whatever we have seen on an average this is going to be higher than 4G for sure.
Kunal Vora — BNP Paribas — Analyst
Sure. Thanks. Just one small question. If you have any impact on the dividend distribution strategy, dividend payout, which you are looking at. That’s it from my side.
Vikas Poddar — Chief Financial Officer
Kunal, I’ll take that one. I think like I said, I mean, our dividend policy has not changed. It still remains linked to the cash flow. So, hopefully, we will keep evaluating the cash flow situation of the company and we will stick to the policy. If there is any excess cash flow, we would be happy to sort of distribute that out. So we will keep evaluating and then we will see whether that goes.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you, Kunal.
Operator
Thank you very much, Mr. Vora. The next question comes from Mr. Vivekanand Subbaraman from Ambit Capital, Mumbai. Mr. Subbaraman, you may ask your question now.
Vivekanand Subbaraman — Ambit Capital — Analyst
Hi, thank you very much for the opportunity. Unfortunately my questions are on the same two issues that got discussed before. So, on renewals, I’m trying to understand this better. So, you said that through the year there will be co-locations that will come up for renewal and therefore the new rates will kick in. So there will be a Q-o-Q revenue reduction. Is that understanding correct?
Bimal Dayal — Managing Director and Chief Executive Officer
Yeah. So we have all the co-locations that would, I mean, bulk of it was renew — was due to renew in March 2022, but even in the next 9 or 10 months we will have the co-locations that will come up for renewal, but bulk of it has already got renewed as of April 1st. So there will be small portions that will keep coming up and we will basically apply the new rates as and when they come up.
Vivekanand Subbaraman — Ambit Capital — Analyst
Okay. So, extending this a bit more, you would definitely have some tendencies that will come up for renewal perhaps in 2023 and ’24 from the two large operators. Does this mean that you have to negotiate for those tenancies again or will the same conceptual framework be applicable in subsequent years also when those respective co-locations come up for renewal?
Bimal Dayal — Managing Director and Chief Executive Officer
Vivekanand, it — the same framework would be applicable to the tenancies which will come up for renewal in the future as well. So I think whatever we have right now, the understanding is this is for the tenancies which are coming in for renewal and the future tenancies as well.
Vivekanand Subbaraman — Ambit Capital — Analyst
Great. And so could you help us understand what percentage of the co-locations from these operators come up for renewal in fiscal ’24 and ’25, any broad ballpark will help.
Bimal Dayal — Managing Director and Chief Executive Officer
So I do believe that bulk of it would be behind us or is behind us in the current and the coming fiscal year. I think maybe offline we can share through Dheeraj what kind of staggering we have for these tenancies in the coming years as well.
Vivekanand Subbaraman — Ambit Capital — Analyst
Understood. And the last one which is on receivables, so if I understand correctly we had a payment plan from Voda-Idea we announced this on Feb 22nd. So from then to July 15th there was a certain committed payment. Can you help us understand if this committed payment for this period Feb to July covered the billing that you had from Voda-Idea or was it significantly lower? I’m trying to look at it from the perspective of a new payment plan that you are trying to arrive at with Voda-Idea.
Vikas Poddar — Chief Financial Officer
Yeah, sure. I’ll take that one, Vivekanand. I think the payment plan that we had agreed back in February had two parts. There was the first part which was linked to the primary pledge or the security that we had, which we sort of supported the restructuring and as a result that was monetized by the promoter and routed back to VIL and then it was basically used to pay our outstanding. So that was the first part. And then there was a second part wherein we had a minimum commitment of INR3,000 crores in that period. So both these parts basically covered our billings in that period and that got over on July 15th and that’s when we reach out for a new payment plan for the future.
Vivekanand Subbaraman — Ambit Capital — Analyst
Okay. And by when do you think you will be able to conclude the new payment plan the one that you described where VIL has given us certain roadmap, but you are hopeful of something better?
Bimal Dayal — Managing Director and Chief Executive Officer
So, look Vivekanand I think this is an ongoing discussion and a negotiation as well which we are constantly engaged with the customer as well and I think pretty much everybody including the senior people at the Board are involved at that level as well. I can’t give you a date of conclusion here, but the engagement is on as we speak as well. And I think we all understand how important it is for this company to improve our cash flow situation as well. So it’s absolutely taking the highest level and highest priority for all of us as well. And I think sooner this happens, the better and that’s the endeavor for all of us right now.
Vivekanand Subbaraman — Ambit Capital — Analyst
All right. Thank you and all the best.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you very much Mr. Subbaraman. The next question comes from Mr. Arun Prasath from Spark Capital, Chennai. Mr. Prasath, you may ask your question now.
Arun Prasath — Spark Capital — Analyst
Thanks for taking my question. You mentioned that 5G loading will be relatively lower as compared to 4G. Can you, fundamentally, can you explain why fundamentally that should be there or is it some of the higher cover for 5G [Indecipherable]. Can you just explain little bit on that sir.
Bimal Dayal — Managing Director and Chief Executive Officer
So I think major, if I remember it right, the major loading is coming from the power requirements as well and also the antennas, which would go up as well. I think it is the power requirement which actually will alter the loading or get us the bulk of the loading as well.
Arun Prasath — Spark Capital — Analyst
Okay. So that doesn’t — that means that we also need to come — at the Tower Co. we also need to update our royalties on say battery or 3G infrastructure side to support the higher electrical load.
Bimal Dayal — Managing Director and Chief Executive Officer
That’s correct. And all this depends on the condition of the site as well whether we have headroom or whether we need to improve the site condition to match the load requirements as well and that’s an ongoing exercise as well. I don’t think I would possibly be too worried about that part.
Arun Prasath — Spark Capital — Analyst
Understood. And second question is on lean towers that we are talking about. Is the understanding correct that going forward we will be only deploying the leaner towers and not the traditional ones we use to deploy earlier? Is it what we have agreed with the customer as well?
Bimal Dayal — Managing Director and Chief Executive Officer
No, I don’t think that’s the understanding. Leaner towers provide limited loading opportunity as well. Every product which we actually put up has its own applicability after which the other product kicks in as well and I don’t think there is a cannibalization which takes place as well. Hence, wherever operator has to put a heavier site which has loading requirement higher than the leaner one, I think the next level of site kicks in. So I don’t think it would be right for you to conclude that the only leaner sites will be installed. Yes, at the moment, we are seeing very good traction from the customers to build the leaner sites as well and I think we have also improved upon cost structure of this tower as well which is fitting in the build for a faster rollout as well.
Arun Prasath — Spark Capital — Analyst
Okay. Just to bit understand little bit more, is the leaner tower solution offered by Indus, because one operator is expanding and another operator is not putting enough capex or not giving any orders. So in order to minimize the capex we go with the leaner towers, is the understanding right at least?
Bimal Dayal — Managing Director and Chief Executive Officer
Well, it’s a product in itself. And if we go back in time when we used to make single tenant sites, we were not even recovering. We were negative with leaner towers. We make reasonable money as well. And it’s not a money losing venture as well. So it’s a good thing. While we roll it out for one customer, I think we do believe that it would also provide a good takeoff path for our next customer as and when the customer wants to deploy sites on similar rooftops as well. So I think it fits the bill for us in a very good way and it fits the current scheme of things as well in which we have asymmetric rollout taking place between the operators.
Arun Prasath — Spark Capital — Analyst
And I whenever the other operator is ready, how will we accommodate that operator in the leaner towers? Do we have a pathway for that or it’s something that we are ready to analyze the scope?
Bimal Dayal — Managing Director and Chief Executive Officer
So, this depends from site to site as well, but I think one of the biggest things which happens in acquiring any site is the physical acquisition of the site, rest is around the electrical and let’s say the physical towers as well, which is an easy and doable thing as well. So once you acquire an area, I think the hard part is done, rest is really fixable for the second operator as well, which is our core business. So we are — all I can say is with even leaner towers being rolled out, we are ready for the second operator depending on the condition of site to site as well.
Arun Prasath — Spark Capital — Analyst
Very helpful. Thanks.
Operator
Thank you very much, Mr. Prasath. The next question comes from Mr. Manish Ostwal from Nirmal Bang, Mumbai. Mr. Ostwal, you may ask your question now.
Manish Ostwal — Nirmal Bang — Analyst
Yes, sir. Thank you for the opportunity. I have only one question. With respect to the provision of — for our — one of our telecom customers, so up to June 30, 2022 we have taken the most of the provision or how the provision line with respect to this thing will move forward in coming quarters. Can you guide us on this front.
Bimal Dayal — Managing Director and Chief Executive Officer
Yeah, sure. So, basically, like I said because of the risk that we have within our accounts receivable, we have adopted a more stringent provision policy, and as a result, we have made a provision. Now, going forward, like I said, we are sort of engaged and discussing a better payment plan. The current commitment that we have indicates part payment of the bills till December 2022. If that happens, then that would mean that the receivables would probably worsen a bit more before we start seeing improvement, in which case there might be a situation where we will have to provide more to sort of keep managing the risk of account receivable. So, I mean, we have to really monitor this very, very closely, assess the situation and see how we decide on this one.
Manish Ostwal — Nirmal Bang — Analyst
Sure, sir. Thanks a lot.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you very much Mr. Ostwal. The next question comes from Mr. Praful Kumar from Dymon Asia Capital, Singapore. Mr. Kumar, you may ask your question now.
Praful Kumar — Dymon Asia Capital — Analyst
Hi, thanks for the opportunity. Am I audible.
Bimal Dayal — Managing Director and Chief Executive Officer
Yeah.
Praful Kumar — Dymon Asia Capital — Analyst
Sir, just two questions, first in terms of now 5G rollout, I’m sorry I am asking this again, can you just explain a bit more how this is a bigger opportunity for us in terms of revenue growth. So, is it that more products are being demanded by the operators or how exactly is the value add that we do in this rollout?
Bimal Dayal — Managing Director and Chief Executive Officer
So you have two questions Praful. Would you like to ask the second one as well or.
Praful Kumar — Dymon Asia Capital — Analyst
Yeah, yeah. Second question is I think extension of the previous one. Can you explain a bit more on why receivables taking a write-off and you think it would be a big worry because if the third operator is being now government guaranteed, so what exactly is the problem here in terms of underlying cash flows. What exactly is the problem here.
Bimal Dayal — Managing Director and Chief Executive Officer
So, Praful, I’ll give two comments on what you just mentioned, one government guaranteed, and second, write-off. I don’t think there is a write-off taking place or a second there have government guarantees here as well. Technically, I would like Vikas to answer this question on receivables. I’ll take the 5G rollout subsequently. So, please.
Vikas Poddar — Chief Financial Officer
Yeah. So, Praful, I think the rationale is the fact that we have a very aging receivables, while there is a payment plan in place, which gives us the visibility of eventually collecting all the dues. But at the same time, we have the account receivable that’s aging and very concentrated with a large amount. And hence as a prudent approach, we have decided to provide so that we are managing the risk very well. So I think it’s like Bimal said, it’s not a write-off, it’s just a provision and there is no government or the sovereign guarantee behind this. This is purely a commercial outstanding that’s there.
Bimal Dayal — Managing Director and Chief Executive Officer
So just to add little bit more color on, I think we’ve been talking about this receivables, I think please look at it this way that we also have been in our discussions with the customers we have been told that we will not be worse-off when it comes to the payments made on a percentage basis by our customers, which actually on an extrapolation tells us that we are kind of not the only ones in this entire ecosystem. Hence, we all are actually eagerly looking forward to, I think, the financial package, which has been spoken by our customer as well and those closures basis which they have given the payment plan as well.
I do believe that since you brought out the government, I think in public domain information, it is very clear that the customer is also waiting for the equity conversion as well and I think that’s where you actually mentioned the government guarantees, but I think that thing has still not happened if I remember it right as well. So I think few things, few good things have to actually take place before the whole thing starts to fall in place as well and we are eagerly waiting or watching this.
On the 5G side, we do believe that this time the enthusiasm and the strategy from the customers is certainly going to be slightly different than what we’ve seen in the past. If you actually go back to some of the strategy which let’s say operators adopted when 3G was rolled out or even 4G was rolled out initially, I think we actually took hotspot approach or we used to wire up areas where the traffic is supposed to be higher and we used to have this concept of hotspots as well and then we saw a mighty rollout of 4G and everybody started to look at a wide brush approach towards papering up the entire country with 4G.
Now 4G has taught us a lot of lessons as well, and we do believe that there will be a very quick proliferation of 5G on our site itself and we will see huge amounts of rollouts coming up on our existing sites. As I mentioned, the per site basis as well we will probably have revenue which is higher than what we derive out of 4G, but remains to be seen what the operators end up with as well. Hence, this is what gives me the backing of what I’m saying that it would be significant for us in, let’s say, next 12 to 18 months as well before the next phase of 5G kicks in, which will be occupying the space, which makes us even more relevant, which means the ultra-low latency networks as well.
I think initially we will have the massively broad broadband proliferation of 5G and then later on we will see the ultra-low latency networks coming up as well, which will occupy the street furniture much more, wherein we become even more relevant as well. So that actually tells me 18 months with huge amount of rollouts of 5G on our existing sites post that I think we will certainly see low latency coming up as well. So it’s a good thing for tower industry.
Praful Kumar — Dymon Asia Capital — Analyst
Got it. Thanks a lot.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you very much, Mr. Kumar. The next question comes from Mr. Varun Ahuja from Credit Suisse, Singapore. Mr. Ahuja, you may ask your question now.
Varun Ahuja — Credit Suisse — Analyst
Yeah, hi. Thanks for the opportunity. I just want to ask two questions and obviously those are related to two big things, one is the rental negotiation and also on the receivables. First, on the rental negotiations, can you give some clarity on it, because the last time when it happened I think there was a detailed presentation over there and the attempt was that in future whenever the negotiation will happen or the renewals will happen rather the right from the older and newer tenancy will be at the equilibrium level and that’s why the overseas happen and all that changes happen. But looks like based on my understanding what is happening is you’re going back again to the same scenario where after 10 years again you will have the 2.5% escalation and when the renewal will happen the older and newer tenancy will at the different rate. How are you accounting for that where the genesis of this problem started so any clarity on that front will be helpful.
Secondly, on the the receivable, can you explain how does the movement will happen on it in the future or other way till when date — in terms of debt you have kind of provided provisions for the VIL receivable that is number one. In the future, how should we think about the movement on the receivable side if there is a quarterly revenue run rate from VIL? How much are you collecting and how much you’ll add to the receivable any clarity on that front would be helpful. Thank you.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you. Thank you Varun for your question. Look, I think my understanding of 2016 was a structural correction that was made in which on one hand we had escalation freeze taking place, other hand we got five-year extension of the renewal for a set of tenancies. Obviously, this actually also brought in the concept of the great lift as well. However, it was very clear within the MSA framework as well that these tenancies will expire in a period of time, which was — which we’ve been actually transparently sharing with you that by March 2022 almost a third of our tenancies were to expire which they did.
I would say that under the current circumstances I — there was no other way than kind of engaging with the customers and negotiating a great deal which we have managed to do. I do believe that we have, under the circumstances, a great deal in which we have secured this for another 10 years. For our infrastructure business like this, I think it’s sealed for a good period of time as well. Now, please put yourself in shoes wherein you were to negotiate a deal like this where you are negotiating with customers and I think the difference between the balance sheets of each of these customers and Indus Towers there is a truckload of gap as well.
And in that context, I think where we stand with the kind of impact Vikas has spoken, I think this is a great deal which we have secured not only for Indus Towers, but for the industry itself because whatever we end up doing actually becomes industry benchmark. I think 10 years is a great period of time as well. I do believe that whatever impact we have, let’s put it this way, with accelerated 5G rollout with a newer sites coming in, I think we should be able to follow this within, let’s say, a year, year and a half and we have clear seven, seven and a half years of growth. Please remember that this 2.5% escalation year-on-year is a great thing to happen and I think there is no way this model will get changed or get worse from here on. I think it is a great model, which has delivered in the past.
So I think we certainly have come out clean with minimum or no change to the model. So, I’m as CEO, Managing Director of this company, I am very happy that we have secured this under very, very difficult circumstances, not only for us, but for our customers as well. And good that we’ve done it for both the customers. And as you would know both the customers are in a very different frame when it comes to their financial position. On the second part Vikas maybe you can take up.
Vikas Poddar — Chief Financial Officer
Yeah, sure. So, hi, Varun. So I think your question just to sort of recap the question, your question is how do we really see the receivables sort of moving going ahead. So, I mean, first of all, I want to start with saying that, I mean, if you look at the trend in the last couple of months because of various reasons if we just keep aside the security money that we received then excluding that we have been getting payment of roughly 50% to 60% in the last couple of months of our monthly dues. And we have also basically from public domain and from the information that we have know that the customer has a funding plan, which is in discussion with its lenders and that will have a huge bearing on their cash flows and their ability to invest and so on.
So the payment plan, like I said, we have received still indicates that they won’t be able to make full payment of monthly dues till December 2022. In which case, if that happens, then directionally we can expect that the receivables will go up further and in which case, like I said, we will continue to assess the situation, and wherever we see the accounts receivable risk developing, we will make the necessary provisions to do adequate derisking of the situation. So I think the simple answer is moment-wise while I said we are discussing and trying to work out a better plan, but given the current indications, it seems like it will go up for a couple of months.
Varun Ahuja — Credit Suisse — Analyst
Okay. Thank you. The last question was for the provision that you have provided till what date, any month, by when those provisions you have made in terms of account as a bad debt?
Bimal Dayal — Managing Director and Chief Executive Officer
Again that’s dependent on the policy that we have which is different for different customers. So, again, it’s a bit of a customer-specific information. We may not be able to reveal that Varun, but I can assure you that this is based on a stringent approach that is discussed and assessed and then we make those provisions. If required, we will take another position and make it more stringent if required going forward.
Varun Ahuja — Credit Suisse — Analyst
Okay, thank you.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you very much, Mr. Ahuja. The next question comes from Mr. Ankit Patel from L&T Mutual Fund, Mumbai. Mr. Patel, you may ask your question now.
Ankit Patel — L&T Mutual Fund — Analyst
Yeah, thanks for taking my question. Good afternoon. I have two questions. One was, you mentioned that you expect to receive part of the payments till December. What — if you could at least — if you could quantify what part of the payments, I mean, if there is a range in terms of how it will be received. And the second is, second question is regarding the other customer, how are the payment — how is the payment going on and whether there is any changes in the payment track record over there?
Bimal Dayal — Managing Director and Chief Executive Officer
Yeah. So, Ankit, I think as far as the quantification of the part payment is concerned, I think the, pretty much the past trend that I spoke about wherein excluding the money that we received as part of the security monetization, otherwise we have been getting roughly, like I said, 50% to 60% of our monthly dues. So that is a good indicator of the sort of part payment we can expect going forward subject to whatever discussions we are going to have in terms of bettering the payment plan. So I think that would be a good indicator. Other customers, I don’t think we have major receivables issues, except for one non-JV customer where we have some old age outstanding, but that’s sum is not very material. And in any case, we are working with that customer as well to expedite the payments and recover those dues. So, that’s where we are.
Ankit Patel — L&T Mutual Fund — Analyst
Right. Okay, thanks. Thank you.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you.
Operator
Thank you very much, Mr. Patel. At this moment, there are no further questions from participants. I will now hand over the call proceeding to Mr. Bimal Dayal for his final remarks.
Bimal Dayal — Managing Director and Chief Executive Officer
Thank you. Thanks, Rajita. So I think it’s fairly nostalgic for me. Let me first thank pretty much all my able partners and Vikas and Dheeraj for doing a doing a commendable job. I would certainly like to thank our field force, the management committee members, Indus family, shareholders and the Board Members of past and present Board. The very special thanks to Mr. Kumar, our current Chairman, who has been the biggest support. Pretty much thank you all for joining and making this a great interactive session. I think there is — besides responding there is a great learning as well. So thank you for keeping it alive. Logging off with my best wishes to all with the conviction that the newer leaders will take this great company to greater heights as well. Thank you very much. God bless.
Operator
[Operator Closing Remarks]