Airtel follows Vi, dials DoT for conversion of pending spectrum dues

If firm's plea is accepted, govt will hold a stake in 4 telcos

In a surprising development, Bharti Airtel has become the second telecom company to reach out to the Department of Telecommunications (DoT) for converting its pending spectrum dues into government equity. 

 

Airtel’s move to avail of the Centre’s 2021 moratorium proposal comes three weeks after the government nod to convert financially-stressed Vodafone Idea's (Vi) outstanding spectrum dues into equity shares worth Rs 36,950 crore. With that, the government stake in Vi has increased to 48.9 per cent from 22.6 per cent earlier.    

If Airtel’s request goes through, the government will be a stakeholder in four telecom companies — Vi, Airtel, Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL). Both BSNL and MTNL are government-owned telcos.

As of April, Singapore-headquartered telco Singtel is a significant shareholder in Airtel, holding a direct 9.5 per cent stake in Bharti Airtel. Cumulatively, it holds a 29 per cent indirect interest in Airtel through its 49.44 per cent stake in Bharti Telecom Ltd, the primary promoter entity of Airtel.

 

Airtel's latest move is surprising considering the telco had not taken the government’s moratorium offer earlier, and last month it prepaid an additional Rs 5,985 crore of dues to the DoT for spectrum acquired in the 2024 auctions. In fact, the telco had prepaid all its spectrum dues that had interest costs higher than 8.65 per cent. The spectrum liabilities were prepaid nearly seven years ahead of their average residual maturities, reducing Airtel's exposure to costlier debt, the telco said in a statement.

 

"Airtel may have approached the government's moratorium offer as a way to tide over any cash flow issues. Even in 2021, it was in a much better financial position as compared to Vi. Since then, it has grown considerably, and has been consistently prepaying all dues. Given the pressures of the telecom business, and with the Centre converting Vi's pending dues, Airtel may now be indicating that it also wants government support in some form," a senior industry insider said. 

 

"All telecom operators who had availed of the government's moratorium proposal according to the terms of the 2021 telecom reforms package, are allowed to come back and apply for a conversion of dues into equity. Now, both (Airtel and Vi) have done so. The request will be looked into," a DoT official said. He said the government has maintained that all requests will be examined on a case-by-case basis. Queries mailed to Airtel and the DoT did not elicit a response.

 

As part of the telecom reforms package approved by the Cabinet in September 2021, the government had allowed a four-year deferment on annual payments of dues arising out of the 2019 Adjusted Gross Revenue (AGR) judgement by the Supreme Court. Scheduled annual payment of dues for spectrum purchased in past auctions was also deferred for four years. It also allowed financially stressed telcos the option to convert a part of their debt owed to the government into equity.

 

The reforms package had allowed converting the interest on the moratorium into equity, which Vi opted for. It also kept the option open for the government to convert the moratorium principal into equity around the time when the four-year payment moratorium ends in September 2025. Airtel has applied for the same in its letter to the DoT.

 

Market leader Reliance Jio did not avail of the moratorium offer considering the telco had limited AGR dues. It also had low dues for spectrum purchase in auctions. By 2022, it had fully repaid dues related to spectrum acquired in the 2014, 2015, 2016, and 2021 spectrum auctions.

 

As for Airtel, it prepaid Rs 25,981 crore of high-cost spectrum liabilities in FY25 and has cumulatively prepaid spectrum liabilities of Rs 66,665 crore. The prepayments had resulted in Airtel clearing Rs 116,405 crore (Rs 1.16 trillion) of scheduled instalments that would have otherwise been payable on their respective dates over the original tenure of the liabilities.

 

The telco had also lowered its cost of debt on the spectrum liabilities to an average of approximately 7.22 per cent on the remaining Rs 52,000 crore of liabilities, excluding the AGR dues. The residual spectrum liabilities now carry a long repayment profile, payable in annual instalments until FY42.

 

Airtel shares fell 1.96 per cent to Rs. 1844.8 in intraday trading on Thursday.