In a surprising development, Bharti Airtel has officially approached the Department of Telecommunications (DoT) to request the conversion of its deferred adjusted gross revenue (AGR) dues, which amount to approximately ₹40,000 crore, into equity. This strategic move comes shortly after the government transformed Vodafone Idea’s spectrum dues of ₹36,950 crore into equity, significantly boosting its stake from 22.6% to 48.99%.

Background on Telecom Reforms

The recent actions by Bharti Airtel reflect the ongoing adjustments within the telecommunications sector following the 2021 telecom reforms package. This package introduced a four-year moratorium on statutory dues, including AGR and spectrum payments, while allowing telecom operators to convert deferred dues, including interest, into equity. While Vodafone Idea opted for both moratorium and equity conversion, Airtel initially chose only the moratorium.

Potential Impact on Bharti Airtel’s Stake

If Bharti Airtel’s request is granted, the conversion could lead to a modest government stake of approximately 3-4%, based on Airtel’s closing share price of ₹1,845.60 on the National Stock Exchange. Analysts suggest that this stake would be relatively easy for the government to divest in the secondary market, especially considering Airtel’s solid fundamentals and robust stock performance. The conversion of dues to equity is also expected to positively influence share prices, as it would alleviate interest costs and free up capital for network upgrades and expansion.

Financial Moves Strengthening Bharti Airtel

In preparation for the impending end of the moratorium period, which starts in September, Bharti Airtel has taken proactive measures to fortify its financial standing. Recently, the company prepaid ₹5,985 crore to the government, settling its liabilities from the 2024 spectrum auctions. As of now, its total outstanding spectrum debt is ₹52,000 crore, which encompasses dues from auctions in 2021 and 2022. Overall, Airtel has pre-paid ₹66,665 crore in spectrum liabilities, significantly easing its interest burden.

• Average Interest Rate: The average interest rate on these pre-paid amounts stands at approximately 9.74%, with some earlier liabilities having rates as high as 10%.
• Financial Strategy: These payments have been made nearly seven years ahead of their respective maturity dates, allowing Airtel to avoid future repayments totaling over ₹1.16 lakh crore.

Government’s Consideration of Equity Conversion Requests

DoT officials indicated that each request for equity conversion will be evaluated individually, with no guarantee of automatic approvals. However, given that the telecom reforms are designed to benefit the entire sector—not just specific entities—analysts believe that Bharti Airtel’s request may be challenging for the government to reject.

In conclusion, Bharti Airtel’s request to convert its AGR dues into equity not only showcases its strategic foresight but also highlights the evolving landscape of the telecommunications sector in India. As the industry braces for the end of the moratorium, all eyes will be on the government’s response and the potential implications for the future of telecom operators in the country.