Aircel files for bankruptcy, American Tower suffers $140 mn hit

American Tower Corporation (ATC) has revealed a big hit to its books due to its tenant mobile operator Aircel, which has filed for bankruptcy protection. The NYSE-listed firm, after performing an impairment test, has reduced the value of assets listed on its books by as much as $140 million (Rs 933 crore) due to Aircel, which also finds itself in the spotlight after the Central Bureau of Investigation (CBI) examined documents related to IDBI Bank’s loan exposure to the companies of former Aircel promoter C Sivasankaran.

On February 28, 2018, Aircel filed for bankruptcy protection. The bankruptcy process is expected to take at least several months to complete and the ultimate outcome has yet to be determined.

“The company performed an impairment test based on current expectations of the impact of the bankruptcy on projected cash flows for assets related to Aircel. These assets consisted primarily of towers, which are assessed on an individual basis, network location intangibles, which relate directly to towers, and tenant-related intangibles. As a result, an impairment of $40.1 million was taken on the tower and network intangible assets. The company also fully impaired the tenant-related intangible asset for Aircel, which resulted in an impairment of $107.3 million during the three months ended March 31, 2018,” American Tower Corp said in a US regulatory document filed on Wednesday.

These impairments were recorded in ‘other operating expenses’ in the consolidated statements of operations of ATC. Given Aircel’s recent bankruptcy announcement in India, ATC has also raised its churn expectations for the market in 2018, accelerating the timing of a certain churn they had previously anticipated to occur over the next several years.

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As a result of the telecommunications carrier consolidation occurring in the India market, including the impact of Aircel’s filing for bankruptcy protection, ATC lowered its discounted cash flow projections, which increases the sensitivity of these projections to changes in the key assumptions used in determining the fair value of the India reporting unit as of March 31, 2018.

In October 2017, one of the company’s other tenant Tata Teleservices had announced plans to exit the wireless telecommunications business.

“Changes in cash flows from Tata Teleservices could impact previously recorded tangible and intangible assets, including amounts recorded as tenant-related intangibles, which have a current net book value of $417.0 million,” ATC said.

By Kumar Shankar Roy, DNA Money