When the telecom company prepaid its spectrum dues, it relieves itself of the liabilities when it acquired spectrum.
Reliance Jio Infocomm Ltd., the telecom arm of Mukesh Ambani’s Reliance Industries, has prepaid its liabilities and interest worth ₹30,791 crores to the Department of Telecom (DoT). This will clear their liabilities of the spectrum.
The liabilities the company faced are the ones they pertained to when they acquired spectrum in 2014, 2015, 2016 and 2021.
The 2021 spectrum was acquired through trading of right to use with Bharti Airtel Ltd. The company acquired a 585.3 MHz spectrum in these deals.
Reliance Jio had executed their first tranche of prepayment on October 2021 for the spectrum they acquired in 2016.
The DoT on December 2021, decided to provide the telecom companies with the flexibility to prepay their deferred spectrum liabilities on any date.
After this, the company prepaid the entire amount pertained to the rest of the spectrum liabilities in January 2022. This was done without declaring a moratorium like its peers on paying spectrum dues.
These liabilities were due to be in annual instalments from FY 2022-23 to 2034-2035. It carries an interest rate of 9.30% to 10% p.a., and an annual residual period of seven years.
The company estimates that this move will save ₹1,200 crores annually as interest cost savings, which would be squandered paying up of these liabilities.
Even though they might have raised their tariffs, number of wireless customers grew to 2.01 million by November 2021. According to the Telecom Regulatory Authority of India (TRAI) latest subscriber data, Jio’s gross mobile user base is 428.61 million.
At the same time, Bharati Airtel has paid its 2014 spectrum liability of ₹15,519 crores, where they bought a 128.4 MHz spectrum. It also includes the spectrum they acquired after the acquisition of Telenor in 2018.
This will save ₹3,400 crores for the company, which would have squandered over the interest expenses. But they still have the additional liabilities of ₹74,500 crores for the spectrums they purchased between 2012 and 2021.
With the company under a four-year moratorium for spectrum dues and AGR dues, it is unclear they would fully prepay the amount as Jio did. The company in its statement has welcomed the move.
The company has already paid ₹18,400 crores as AGR dues, with ₹25,000 crores remaining. But when it comes to VI, the situation is dire as the government will own 35.8% of its shares.
The TRAI move for removing the date for liquidity is the first in a series of steps to fulfil the woes of the telecom companies. In this environment, they can invest in expanding their operations and invest in new technologies such as 5G.
Follow and connect with us on Facebook, LinkedIn & Twitter
