Airtel dials DoT, seeks conversion of govt dues into equity

Taking a cue from rival Vodafone Idea, Bharti Airtel has reached out to the government seeking conversion of more than Rs 41,000 crore adjusted gross revenue (AGR) dues into equity. If approved, the government will get a 2-4% stake in India’s second-largest telecom operator.

In a recent letter to the Department of Telecommunications (DoT), Airtel sought a “level-playing field and non-discriminatory policies in the telecom sector,” said an official aware of the details.

Airtel’s move tracks the government’s latest decision to defer a proposal for waiving off interest and penalties on AGR dues. It also marks a shift from its previous stance of not giving any equity to the government.

Officials said Airtel wrote to DoT on April 1 after the Centre approved conversion of Vodafone Idea’s spectrum dues into equity. The company has specified its payables to the government, totalling more than Rs 95,000 crore, including about Rs 53,500 crore for spectrum and AGR dues till FY18-19 of more than Rs 41,000 crore.

Airtel noted that while it was entitled to convert all dues into equity, given those beyond the government’s moratorium period are also being converted into equity, it has restricted itself to converting only the AGR dues for the time being, officials said.

(TURNLINE) Right to Approach DoT

The company has prepaid its entire spectrum dues prior to the 2021 spectrum auctions and also for the 2024 auctions. It, however, has to pay for 5G spectrum, bought in 2022. It emphasised that it should not be put to any disadvantage for making advance payments of spectrum dues.

Further, Airtel added that it reserves the right to approach DoT in future regarding the treatment for such prepayments, to ensure an equitable outcome.

Airtel did not respond to ET’s queries.

Queried on Airtel’s demand on AGR dues, communications minister Jyotiraditya Scindia told ET that rules around equity conversion apply to all, and that the department will decide on such requests. “DoT will evaluate the proposal…it’s a level-playing field for everyone,” Scindia said.

However, the minister had ruled out any further increase in government stake in Vodafone Idea from the current 49% — after the latest conversion —and also stressed that the company has to pay statutory dues. DoT on March 30 approved converting Rs 36,950 crore worth of Vodafone Idea’s spectrum dues into equity, boosting its stake to 48.99% from 22.6%. This was the second such conversion after a similar move in February 2023.

Incumbent telcos are being pushed to seek equity conversions as a DoT proposal to waive AGR dues has been put on hold due to a lack of consensus within the government’s higher echelons. An approval would have given Rs 1 lakh crore in relief to the older telcos, more than half of which would have accrued to Vodafone Idea, followed by Airtel, which was set to benefit immensely with the proposal.

“But any relief to Airtel could have raised eyebrows as the company has been doing well financially and has the ability to repay the amount,” an official said.

Airtel posted a net profit of Rs 14,760.7 crore on revenue of Rs 46,878 crore in the December quarter, with an industry-leading average revenue per user of Rs 245. Cash and cash equivalents at the end of that quarter stood over Rs 9,922 crore.

In its 2021 bailout plan, the government allowed a four-year moratorium on payment of AGR and other statutory dues. That moratorium ends September 2025 for spectrum dues and March-April 2026 for AGR dues.

According to DAM Capital, Airtel needs to pay around Rs 8,400 crore annually in AGR dues instalments over six years.

DoT’s AGR waiver proposal was an attempt to give some relief to telcos who have exhausted all legal remedies.

The telecom industry, which had been reeling financially due to cutthroat competition since the entry of Reliance Jio in 2016, took a hit when the Supreme Court in October 2019 backed the government’s view and levied Rs1.47 lakh crore of AGR dues. That comprised Rs 92,642 crore of licence fees and spectrum usage charge (SUC) dues to the tune of Rs 55,054 crore. Nearly 75% of the dues comprised interest, penalties and interest on penalties.