‘TURN AROUND’ two seemingly innocuous words, but ones which have been at the forefront of our minds for the last six years. In fact, we have been obsessed with it.
Ever since we restructured our debt under the Corporate Debt Restructuring (‘CDR’) mechanism in December 2011, we have been constantly asking ourselves how do we ‘turn around’? Finally, in hindsight, the answer was clear. Rather than complain about the unending barrage of problems being faced by the ever deteriorating telecom industry at that time, we accepted that we were the masters of our own fortunes. We decided it was time to roll up our sleeves and dig deep to rebuild our business and financials and reduce debt.
Looking back now, we feel we achieved some significant goals.
In an industry plagued with problems of over leverage, we appear to have resolved our debt issues - an outcome which is the result of relentless and collaborative efforts by the promoters, management and the lenders.
In the tower business alone, the debt (on a combined basis of GTL Infrastructure Limited and Chennai Network Infrastructure Limited) has come down from a peak level of Rs.13,318 crores (US$ 2054 Mn.) at the time of CDR to Rs.4,841 crores (US$ 747 Mn.) in April 2017. It is expected to further go down to Rs.3,840 crores (US$ 592 Mn.) by 2019. This represents a staggering reduction of 71% on an absolute basis.
We achieved this by adopting a very strong commitment towards our Lenders, reducing our own shareholding in combined entity from 80% down to 20% post SDR (assuming full conversion of Convertible Bonds) and with a strong resolve to find a suitable new investor to take the Company to the next level so that the business can continue to grow and prosper truly benefitting the customers, lenders and employees.
During our turnaround process, we set ourselves certain goals and are happy to see that these have been achieved during the journey:
Strong Commitment to Lenders
This has been one of our foremost objectives; we focused continuously on reducing the debt levels. Towards this end, we have restructured the debt of the tower companies twice in six years, thereby protecting the lenders’ interests by discharging (including by way of conversion) or repaying principal and interest to the magnitude of Rs.14,600 crores (US$ 2,252 Mn.) -all this without having to downgrade the quality of assets in their books. An additional aspect of this commitment was the sacrifice of the company promoters’ cross holding of Rs.1,856 crores (US$ 286 Mn.) post the proposed CNIL merger.
We grew our revenue from Rs.1,008 crores (US$ 155 Mn.) in FY 2010-11 to Rs.2,286 crores (US$ 353 Mn.) in FY 16-17. Barring the unexpected, this is expected to grow to Rs.2,600 crores (US$ 401 Mn.) this fiscal. This would represent a CAGR of15% from the time of the initial restructuring. More importantly, the normalised EBITDA grew from Rs.582 crores (US$ 90 Mn.) in FY 10-11 to Rs.1,122 crores (US$ 173 Mn.) in FY 16-17. The normalised EBITDA is also expected to enhance to Rs.1,350 crores (US$ 208 Mn.) this fiscal which represents CAGR of13%.
Focus on end Customers
Despite massive turmoil in telecom sector we have enhanced Network Uptime from a low of 96.5% in 2011 to 99.9% in last 6 years under normal conditions.
In the bargain we have made it easy and quicker for our Customers to do business with us.
- Added 16,700 new tenants from FY 2011-12 to take our tenancy to 50,845 in FY 2016-17 and this is likely to cross 55,000 this fiscal.
- Created tremendous focus on Customer Loyalty and Network Uptime.
- Committed our Company for consistent Revenue Growth and Profit.
Restoring Shareowners’ and Lenders’ value is now a “matter of principle”
Success in my opinion has three essential ingredients:
i) A passionate commitment to your goal
ii) The courage to dream and take the risks
iii) The morale and intellectual character to realise the dreams worth pursuing and the best route to take to achieve them
With the turbulent times facing the telecom industry, we realised that we were in stormy waters. However, we were determined to not only to stay the ship on course, but committed to turn things around, and build value for all the stakeholders. We knew the challenge would be difficult. The question of how to even go about it itself was daunting. Finally, we felt that one would never find the right answers unless one tackles the issue head on - and so we did.
Life can be rough and the journey is never easy. It is fraught with several pitfalls, adversities and competition - which is often crushing. We needed not only to survive but to come out of the crisis. To overcome this crisis, each individual had to dig deep within oneself to kindle that winning spirit. It required people to be committed, competent and courageous.
When I started, I had a dream. The dream was to create ‘the largest independent tower company’. Unfortunately, with cancellation of the 2G licences, issues faced by Aircel and Maxis and subsequent cancellation of ROFR by Aircel this dream had been shattered, for no fault of mine.
My dream was replaced with a mountain of debt - repayment of which seemed impossible at the time. However, I told myself that turning around the debt problem was something I was going to pursue and work towards. I had the commitment, courage and character, required to help me walk through this.
So me and my team focused on a set of values as below:
I committed to the Goal. Believed in it, more than anyone else ever did. I fought several legal and hostile attempts and overcame every one of my ‘personal shortcomings’ purely on the back of my passion that I brought to task.
I do not know whether you are born with this kind of passion or if you can ‘acquire’ it, but I do know you need it.
If you are passionately committed to what you believe in, you will be out there every day, trying to do it the best way you possibly can and pretty soon everybody around you will latch on to your passion like ‘fever’. It is contagious.
Someone close to my heart says ‘work is worship’ and ‘passion is the driver’ to walk the talk.
Over the last 6 years I am doing all I can to reduce my shareholding in the combined entity from a peak level of 80% down to 20% so that upside can be shared with the Lenders and minority Shareholders. I have also agreed to relinquish Rs.1,856 crores (US$ 286 Mn.) of our group cross holding, in the bargain debt is being reduced from Rs.13,318 crores (US$ 2,054 Mn.) to Rs.3,840 crores (US$ 592 Mn.) eventually by 2019. We have remained a viable company with sustainable debt that cash flow of business can fund.
I request all of you at GTL Infra to keep in mind that several thousand jobs including your own have been saved thanks to the sacrifices banks have made way back in 2011. Helping them recovering the value of their debt and equity is a single best thing we can ‘both do together’. Therefore restoring their faith in all of us is what we need to be relentlessly working towards.
Sharing the upside of equity with them is an essential part of this journey.
I motivated my colleagues with the idea of being a group that repays its debt. Money and ownership were not the only tools I needed to motivate them.
Day by day, the management team strategised, brainstormed and worked together to find new and interesting ways to challenge the rest of our people. WE SET HIGHER GOALS TO LOWER DEBT EACH PASSING YEAR....
We encouraged our people to do better than other tower companies - we did not have any telecom operator as our parent. We remained a fiercely and truly independent tower company.
We made outrageous bets to improve network performance. We set up our own Test and Repair Centre (TRC), reduced security costs and invested heavily in network uptime. Driven with motivated objective to repay lenders and enhance shareholder value, our employees worked relentlessly improving network performance from 96.5% in 2011 to 99.6% in some and in most cases to 99.9% in 2016 & 2017.
At last our hard work is paying off. Throughout our restructuring we remained a standard asset, never turning into NPA for any bank and in April 2017, attaining a status that should possibly restore more than investment grade for our debt. We can potentially become debt free in 4 odd years, should new owners choose to do so.
We communicated our goal to the whole company. ‘Turning Around/Repay Lenders’. The more they knew the more they understood. The more they understood the more our people cared. Thus, there was no stopping them.
The way I saw it, I had to let them know that a few years from now I won’t be your ‘super boss’, that I had to let go, dilute my shareholding and allow a new promoter to be inducted. I had to trust them as this was their ‘fundamental right to know’ about ‘what’s going on?’ Thus, they knew that I really considered them as ‘partners’.
Sharing information on our debt obligations on having to lower debt, challenges we faced in the industry and my plan to exit to benefit minority shareholders and lenders was rewarded with ‘power and productivity gain’ that I got from our people in lieu of clarity and trust put in them. By giving them information I managed to more than offset the risks of worrying about my own future as the founder promoter.
I appreciated everything that our staff and management team have done to turn the business around.
A pay check, a pay rise or incentive will buy one kind of loyalty. But all of us like to be told how much somebody appreciates what we do. We like to hear it often and especially when we have done something that we are really proud of.
Let me say this with 100% conviction. Nothing else will substitute for few well chosen, well timed and sincere words of praise.
To all the Shareholders, Lenders and Employees:
Thank you for being patient and supportive during the most difficult period of our turn around; for six long years from 2011. Your support is appreciated and has given me the strength, energy and courage, essential to fight the adverse headwinds that the telecom industry faced.
Now that we have moved ahead with sustainable debt and a growth oriented business model, we have some objectives to achieve.
We are committed to exceeding our customer’s expectations. We know, if we do, they will come back over and over again. We are engaged to deliver what they want and little ‘more’. We appreciate our customers’ business and are committed to making good on all our mistakes, their demands and in the bargain we are generating tenancy growth that benefits our EBIDTA / free cash flow and that helps us achieve our financial goals. We hope to refinance our debt, bringing our interest liability down from Rs.1,100 crores (US$ 170 Mn.) in 2011 to Rs.500 crores (US$ 77 Mn.) in 2018 and further to an estimated Rs.275 crores (US$ 42 Mn.) by 2019.
Control all our expenses, be the lowest cost operator. Doing this better than competition does, is key to growth and success. This is where we want to create the competitive advantage. For 11 long years, much before we commenced the tower company operations, we have struggled to keep the lowest rate of wages and expenses to revenue and sales and EBIDTA. We can make a smart recovery out of our mistakes, if we can run an efficient operation.
.... and finally,
The SDR rules require us to help banks sell down 26% of their equity within 18 months from September 20, 2016. The efforts, which have begun in all earnest with the help of Ernst & Young and TAP Advisors, will trigger a change of control by 2018.
As promoters, if required we have agreed to sell down our entire shareholding as well, so as to permit more than 51% acquisition by prospective buyer, be it a strategic, private equity or pension fund investor, to help us become part of consolidation process in tower industry.
But fear not my beloved Globalites, our management team and me shall embrace this change and shall remain committed to assisting the prospective Investor because GTL Infra is no ordinary tower company. It is destined to succeed. In doing so, your contribution has so far been extremely useful and invaluable for which I am eternally indebted to all of you.
Manoj G. Tirodkar