In October 2021, Airtel had opted for the four-year moratorium on AGR and spectrum dues. However, the telecom companies was required to pay interest on these statutory dues during the moratorium period.
Bharti Airtel will not opt for conversion of interest on deferred spectrum and adjusted gross revenue (AGR) dues into equity, the telecom operator has informed the Department of Telecommunications (DoT).
“In furtherance to the earlier communication dated October 25, 2021 and in reference to the notification dated October 14, 2021 issued by the Department of Telecommunications (DoT) to the Company, we wish to inform you that the Company has confirmed to DoT that it will not avail the option of conversion of the interest on deferred spectrum and AGR dues into equity,” Sunil Mittal-led telecom giant said in a regulatory filing.
“The fact that Airtel has opted to pay the dues rather than dilute existing shareholders is a positive and gives us an indication of the improving financial situation of the 2nd largest telco. Although this decision will lead to significant outgo of capital, but it is supported by improving outlook for the sector led by increase in ARPU, upgradation of customers to 4G from 2G. Not having government as a significant shareholder is also a positive in our view,” said Divam Sharma, Co-founder of Green Portfolio, SEBI registered Portfolio Management Services.
As a part of the relief package for the telecom sector, Airtel had opted for the four-year moratorium on AGR and spectrum dues in October 2021. However, the telecom companies were also required to pay interest on these dues during the moratorium period. The DoT, had further given a 90-day window to the telcos to decide if they want to opt for converting the interest amount pertaining to the moratorium period into equity.
“This move hints at the company’s intent to prepay the deferred due early and not dilute the existing shareholders in favor of government equity. This decision is a show of confidence by the company to be able to bear the liabilities early in the future and avoid the interest or equity burden. Investors should welcome this move, but there would be increased scrutiny on execution given that the company has taken this decision now,” said Sonam Srivastava, Founder, Wright Research, SEBI registered investment adviser.