After Bharti Airtel's demand, experts call for checks in equity conversion of statutory dues

Time of India

28-04-2025

NEW DELHI: With the government saying that rules around equity conversion of statutory dues apply to all licensees and both spectrum as well as adjusted gross revenue (AGR) dues will be considered, industry executives and experts have called for some checks and balances.Otherwise, the move could open a virtual Pandora's box of requests from different players including internet service providers (ISPs), VSAT firms and profitable telcos, who can potentially seek to convert thousands of crores of all their statutory dues into equity. "And if agreed to, this could lead to the government holding stakes in several private companies, which won't be an ideal situation," said an industry expert asking not to be named.
After the government decided to convert
Vodafone Idea
's
spectrum dues
worth Rs 36,950 crore into equity, the government received a similar request from
Bharti Airtel
- to convert its entire over Rs 41,000 crore
AGR dues
into equity. Airtel's demand came as a surprise as so far, the telco was not inclined to give equity to the government, given its strong financial health in contrast to Vodafone Idea, which ran out of options and was forced to give up its stake to survive.
But the demand from Airtel, experts say, can lead to others also seeking the same treatment. For example,
Reliance Jio
too can seek to convert its spectrum dues into equity as the company doesn't have legacy AGR dues and was not affected by the Supreme Court judgement of 2019, pointed out an industry expert, asking not to be named.
Apart from the telecom firms, there are various ISPs and VSAT players that are saddled with thousands of crores of AGR dues. In case, the government does not provide relief or waiver for such firms, they too can seek equity conversion to clear the dues, the expert said. "The equity conversion for Vodafone Idea was done as the company was struggling financially...if the conversion had not happened, the firm might have gone bust. But the situation for Airtel is different and there should be some checks and balances for applying the equity conversion policy for its AGR dues," Rohan Dhamija, head, India and the Middle East, Analysys Mason.
While seeking a conversion, Airtel has said that it was entitled to convert its over Rs 53,000 crore worth of spectrum dues into equity as dues beyond the moratorium period - which ends later this year - are also being converted into equity. The spectrum dues of Airtel relate to the 2022 5G auction as the company has already cleared its dues before 2021 auctions.
DoT officials, however, refused to clarify if dues beyond 2021 telecom reforms can also be converted into equity. But industry executives said the policy of conversion applies to all dues, including those after 2021. "As per the policy, all companies can offer equity to the government in lieu of their spectrum and AGR dues," said an executive.
Communications Minister
Jyotiraditya Scindia
had previously told ET that rules around equity conversion apply to all, and that the department would decide on such requests. "In general, for telecom and other sectors, the government has to frame the policy on equity conversion by private players in lieu of statutory dues with proper safeguards as otherwise it could disrupt the business environment and government finances," Dhamija added.