InvestorQ : Why has Bharti Airtel paid its telecom dues upfront?
Sam Eswaran made post

Why has Bharti Airtel paid its telecom dues upfront?

Moii Chavate answered.
5 months ago

You are right that telecom major Bharti Airtel paid Rs.15,519 crore to DOT as pre-payment of the total deferred liabilities pertaining to spectrum acquired in auction during the year 2014. At that point of time, Bharti Airtel had acquired 128.4 MHz spectrum for a total consideration of Rs.19,051 crore at the auctions. These were only payable in annual equated instalments between 2027 and 2032.

However, this carried an interest rate of 10% and this would lead to huge savings in interest worth Rs.3,400 crore over the residual life of the repayment. The DOT had given the telecom industry the flexibility to prepay deferred liabilities anytime based on their net present values. This enables a more judicious utilization of cash flows and also allows them to plan their flows better.

Based on the latest relief package provided by the government for payment of spectrum usage charges (SUC), the government had provided 4 years moratorium to the telecom players to reduce the burden of cash outgo on these companies. Bharti Airtel has reported good top line and bottom line numbers in the latest quarter.

The decision to prepay was triggered by the hugely successful rights of Bharti Airtel running into Rs.21,000 crore. The rights had opened on 05th October and had closed on 21st October this year. The issue was oversubscribed and while the full rights amount is payable only over a period of 18 months in 3 tranches, the company has been able to prepay the amount based on its first tranche of rights and its internal accruals.