Because of stronger finances, Bharti Airtel Ltd and Vodafone Idea Ltd are unlikely to convert interest on the deferred spectrum and adjusted gross revenue (AGR) dues into equity, according to a senior government official.
“I don’t believe anyone is considering utilising that option at this time.” “The industry is now considerably more comfortable and confident about commencing the next investment cycle,” the official said on condition of anonymity. According to the official, the telecom sector’s health was improving as a result of an increase in rates and liquidity brought about by the government’s reform package.
The conversion of accumulated interest into equity can be done by invoking Section 62 (4) of the Companies Act. According to amendments announced by the Department of Telecommunications (DoT) in September last year, the sum would be considered a loan until the conversion is completed. The pertinent date would be August 14, a month before cabinet approval.
Bharti Airtel informed exchanges on Friday that it would not pursue conversion. “In furtherance of the earlier communication dated October 25, 2021, and about the notification issued by the DoT to the company on October 14, 2021, we wish to inform you that the company has confirmed to DoT that it will not avail the option of converting the interest on the deferred spectrum and AGR dues into equity,” the second-largest carrier by subscribers said in a BSE filing.
On Friday, Bharti Airtel’s shares finished at 704.75, down 0.77 per cent. The Sunil Bharti Mittal-led carrier has chosen a moratorium of up to four years on AGR and past-spectrum dues and the option of converting interest on the deferred spectrum and AGR dues into equity.
Vodafone Idea has not yet decided whether to convert but has chosen deferred payments of the spectrum and AGR dues, providing it with the opportunity to enhance cash flows and invest in the business.
In a November earnings call, chief financial officer Akshay Moondra stated that the debt-ridden carrier is considering converting interest dues stemming from the delay of statutory payments into equity. It has until January 12 to make a decision.
Vodafone Idea’s total debt, excluding lease liabilities and including interest accrued but not payable, amounted to 1.94 trillion as of September 30 last year. The total includes postponed spectrum payment commitments of 1.08 trillion, AGR liability of 63,400 crores owed to the government, and debt owed to banks and other entities of 22,770 crores.
The company has raised tariffs in line with the industry, which will contribute to the rise of average revenue per user (ARPU) and, as a result, revenue creation. Vodafone Idea is looking to attract funds from current or new investors to increase its annual capital expenditure to $2 billion (about 15,000 crores) from an estimated $500 million at the moment.