Bharti Airtel, one of India’s leading telecom operators, has formally approached the Department of Telecommunications (DoT), seeking the conversion of its deferred government dues into equity. This request is made under the provisions of the 2021 telecom reforms package, which was introduced to ease the financial strain on telecom companies.

The move comes amid intensifying competition, the pressure of 5G rollout investments, and the backdrop of the government increasing its stake in Vodafone Idea to over 49% following a similar equity conversion.

Airtel’s Push for a Level Playing Field

According to senior government officials, Airtel is pressing for equal treatment in the implementation of the telecom reforms. The 2021 package allows telecom companies to defer spectrum and Adjusted Gross Revenue (AGR) dues and opt for equity conversion of interest on these dues.

While Vodafone Idea has already taken advantage of this clause, Airtel had previously chosen not to. However, the telco now believes that the current scenario justifies a change in stance. A senior official confirmed that each application for equity conversion will be reviewed on a case-by-case basis.

Debt Reduction Strategy in Action

Bharti Airtel has been aggressively reducing its debt burden. Just last month, the company prepaid ₹5,985 crore ($698 million) in high-cost liabilities related to the 2024 spectrum auctions. This significantly reduced its outstanding spectrum-related debt to around ₹52,000 crore ($6.27 billion) and brought down the average cost of debt to 7.22%.

The telco has prepaid a total of ₹25,981 crore in high-cost spectrum liabilities in FY2025 and ₹66,665 crore cumulatively, with earlier prepayments made at interest rates as high as 10%. These were settled nearly seven years before their scheduled maturities, demonstrating Airtel’s proactive financial strategy.

Massive Reduction in Future Liabilities

Thanks to these prepayments, Bharti Airtel has effectively cleared ₹1,16,405 crore worth of scheduled instalments. These would have otherwise been paid in staggered instalments across several years. The prepayment has not only eased its financial burden but also boosted investor confidence.

What the 2021 Telecom Reform Package Offers

The 2021 reform package was a game-changer for the Indian telecom sector. It offered:

• Four-year moratorium on AGR and spectrum dues

• Option to convert interest on deferred dues into government equity

• Repayment terms extending up to 2031, with repayments commencing from 2026

• Only 10% of the total outstanding dues to be paid each year until completion

The goal was to ensure long-term sustainability in the telecom space, which has been battling high debt, intense competition, and the costs of technological upgrades.

Vodafone Idea’s Precedent and Government’s Stake

Vodafone Idea was the first to avail of equity conversion, which allowed the Indian government to raise its stake from 22.6% to approximately 49% in March 2024. The conversion accounted for ₹36,950 crore in spectrum auction dues.

While Bharti Airtel has a stronger financial position, its request signals a need for greater financial flexibility and strategic room amid ongoing investments in 5G deployment and digital infrastructure.

No Further Equity for Vodafone Idea, Says Government

Interestingly, Communications Minister Jyotiraditya Scindia recently told the media that no further equity conversions will be done for Vodafone Idea, as this would result in the company becoming a Public Sector Unit (PSU) — a situation the government wants to avoid.

This solidifies the government’s selective approach to equity conversion, making Airtel’s request even more significant in shaping the future course of policy implementation.

The Larger Implications

If Airtel's equity conversion request is approved, it could:

• Strengthen its balance sheet

• Improve its ability to invest aggressively in 5G and rural expansion

• Set a new benchmark for other telcos, such as Reliance Jio, to potentially follow suit if needed

• Trigger a market re-evaluation of telecom equities, especially if such conversions become widespread

It also underscores the critical importance of financial reforms in keeping Indian telcos globally competitive.

Conclusion: Airtel’s Strategic Recalibration

Bharti Airtel’s formal communication to the DoT marks a turning point in its financial planning strategy. By seeking equity conversion under the 2021 telecom reforms, the company aims to further lower its debt and prepare for future growth in a fiercely competitive landscape.

With a robust history of prepayments and prudent fiscal management, Airtel's move could not only reshape its balance sheet but also potentially redefine investor and regulatory expectations in India’s dynamic telecom sector.

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