Airtel’s move comes in the wake of the government recently raising its stake in Vodafone Idea to over 49%.
- The telecom reform package announced in September 2021 allowed telcos to defer spectrum and AGR (Adjusted Gross Revenue) dues for four years. It also provided the option to the operators to convert interest on these deferred payments into equity.
- The moratorium is set to end in September 2025 for spectrum dues and by March–April 2026 for AGR dues. Repayments will commence in 2026 and continue until 2031, with 10% of the amount due to be paid by March 31 of each year.
- Both Vodafone Idea and Airtel had availed themselves of the moratorium, but until now, only Vodafone Idea had opted for equity conversion, resulting in the government’s substantial equity stake in the struggling operator.
- Airtel currently owes the government about Rs 52,000 crore towards spectrum dues and Rs 40,000 crore for AGR dues.
- As per the news sources, Airtel has approached government to convert only AGR dues into equity.
- The Company over the years has been prepaying many of it’s obligations to the government. Current proposal is not because of Company’s inability (unlike Vodafone Idea) to pay. It continues to be well positioned to meet all its outstanding obligations.
- Objective behind the move seems to be to conserve cash for a small dilution.
- Expected dilution, if government agrees is estimated at around 3-4%
Telecom Ministry is speculated to be open towards the proposal to ensure a level playing field for all the companies.