Bharti Airtel Prepays Rs. 8,325 Crores Deferred Liabilities To Telecom Department

Bharti Airtel, the largest telecom giant of India in March 2015, won the auction for the 111.6 MHz spectrum amounting to Rs. 29,129.08 crores from the Department of Telecommunications (DoT). Rs. 11,374.7/- crores from the total dues were paid upfront, and the amount for payments was Rs. 47,832 crores. In August 2022, Airtel was the only service provider to pay DoT dues in advance for the next four years.

The payments received through the deferred spectrum licence are one of the major sources for generating a large chunk of India's Telecom Revenues. These payments are directed to be paid annually as a percentage of Gross Annual Revenue (GRA) for the carrying out operations and smooth functioning of telecom sectors. According to TOI, the Deferred spectrum dues in 2023 are forecast to contribute 30% higher for the Telecom Department Revenue, above Rs. 89,000 crores. A strong surge is evident with the growing demand and dependency on telecommunication services over the years.

The company's official statement declared with the exchange that it has prepaid Rs. 8,325 crores to the Department of Telecom (Government of India) towards part prepayment of the deferred liabilities for the spectrum acquired in the 2015 auction, which is at an interest cost of 10%. The Deferred spectrum liabilities are apart from the gross revenue liabilities appearing in the balance sheet of telecom companies. Since the payment made to the Indian Ministry of Telecommunication is for the airwaves during a year, the instalment payments made earlier with higher interest payments are considered a secured financial pillar for the company.

In August 2023, Reliance Jio was notified of paying Rs. 7,864 crores towards DoT for its second instalment towards the spectrum acquired in 2022. The largest spectrum buyer of the year is set to pay more than Rs. 88,000 crore in instalments spanning the next few years. Similarly, Vodafone Idea Limited (VIL) also paid Rs. 1,680 crore with a grace period of 30 days. VIL had made purchases of around Rs. 18,750 crores in August 2022, for which 20 equal instalments were proposed. In the same month, Bharti Airtel prepaid Rs. 8,024 crore to the DoT towards their first instalment of deferred liabilities to leverage financing at lower cost ahead.

As per the Economic Times, Bharti Airtel was in talks with major banks like Citi Bank Of USA and Barclays of UK for fund-raising, which would facilitate them for prepaying the bulk of the spectrum liabilities bought in 2015. Currently, the shares of Bharti Airtel are trading around Rs. 1,166/-, a hike of Rs. 8/- or 0.7% since the previous closing. However, the price has climbed more than 15% in the past three weeks from Rs. 1,013.05/- on 1st January 2024.

Bharti Airtel still enjoys the well-diversified capital sources allowing it to have a flexible capital structure. The company have been keen on making instalments with high-interest payments to avoid massive liability accumulation in the upcoming years. In the previous fifteen days, the second largest subscriber-based service provider has been receiving consistent penalties from the DoT from various states totalling Rs. 1.5 million for their alleged violation of subscriber verification norms for the period of September-November 2023.