India’s second-largest telecom operator, Bharti Airtel, has availed itself of the government’s proposal of a four-year moratorium on spectrum and adjusted gross revenue (AGR) payments.
Cash-strapped Vodafone Idea was the first telecom operator to have accepted the Indian government’s proposal of a four-year moratorium.
As per reports, the Sunil Mittal-led telecom operator would save Rs 11,000-11,500 crore ($1.49-$1.55 billion) in annual cash flows, which can be used for network modernisation for the 5G technology and new spectrum.
“We wish to inform you that the Company has confirmed to avail the following options; a) deferment of the payment of spectrum auction instalments due up to four years; and b) deferment of AGR related dues by a period of four years with immediate effect,” Airtel said in a statement to India’s stock exchange.
Airtel added that it would consider other options offered by India’s telecom department (DoT) within the stipulated timelines.
Earlier this month, the telecom department had sent letters to Bharti Airtel, Reliance Jio and Vodafone Idea regarding the moratorium options. It gave all three telcos time till October 29 to respond on moratorium options.
Reliance Jio will also opt for the spectrum payments moratorium, as per reports. However, the Mukesh Ambani-led telecom operator doesn’t have any AGR dues.
All three private telecom operators also have 90 days to exercise a one-time option to convert the interest accrues due to deferred payments into government equity.
Last month, India announced a 4-year moratorium for telecom operators, deferring adjusted gross revenue (AGR) and spectrum payments, reduced BGs or bank guarantees and the option to convert statutory dues to government equity. It also abolished the spectrum usage charges (SUC) from future spectrum auctions besides allowing telcos to surrender unused spectrum to the government.
The relief package aims to improve the cash-flow situation for the telecom sector and addresses industry concerns over a possible duopoly of Reliance Jio and Bharti Airtel.
The Sunil Mittal-led telecom operator is also expected to get back bank guarantees (BGs) worth Rs 4,000 crore from the telecom department. These BGs were provided to the telecom department as a cover for spectrum payments.
In addition to the payments moratorium, Bharti Airtel had previously expressed its interest in the option to convert statutory dues into equity. However, the option can be exercised only after the approval of Airtel’s board.
Earlier this month, Bharti Airtel’s chairman Sunil Mittal said that the company’s move to opt for the four-year moratorium on spectrum and AGR payments would help it conserve a cash outgo of Rs 35,000 40,000 crore ($4.73-$5.41 billion). He had said that the cash would be used for network and other capital expansion programs.