Airtel Stuns Telecom Sector with ₹8,465 Crore Spectrum Prepayment, Outpaces Reliance Jio in 2016 Auction Dues

Bharti Airtel, India’s second-largest telecom company, announced on Monday that it has paid ₹8,465 crore in advance to the Department of Telecommunications. This payment clears all outstanding dues related to spectrum it bought in 2016.

In 2016, Airtel purchased 173.8 MHz of spectrum for ₹14,244 crore in the 1800, 2100, and 2300 MHz bands during an auction. At the time, telecom operators were required to pay off their spectrum dues in annual installments over 12 years, with a two-year break after making an upfront payment.

Airtel’s third advance payment in 2023

According to Airtel, the dues carried an interest rate of 9.3%. This marks the third time this year that Airtel has made early payments on its spectrum liabilities from previous auctions.

In June, Airtel, which is backed by Sunil Mittal, prepaid ₹7,904 crore to cover all remaining dues for spectrum bought in the 2012 and 2015 auctions, where interest rates were even higher at 9.75% and 10%.

Earlier in 2023, Airtel paid ₹8,325 crore to reduce its deferred payments for spectrum bought in 2015. During the 2015 auctions, Airtel acquired 111.6 MHz of spectrum for ₹29,130.20 crore and made an initial payment of ₹7,832.58 crore.

Last year, Airtel prepaid ₹8,024 crore in July and ₹8,815 crore in March, ahead of the scheduled payments due in FY27 and FY28 for the same spectrum. In the 2014 auctions, the company bought 128.4 MHz of spectrum for ₹19,051 crore, including spectrum from Telenor’s India business.

Telecom companies are allowed to spread the payment for spectrum purchases over the 20-year license period. In September 2021, the government introduced a relief package that allowed companies to prepay their deferred liabilities. The package also included a four-year payment break for spectrum dues, an option to convert interest payments into government equity, and reduced bank guarantee requirements.

Between November 2021 and March 2022, Airtel prepaid ₹24,334 crore to settle its spectrum dues ahead of time for auctions held before 2014. The company had also prepaid ₹15,519 crore for spectrum bought in the 2014 auctions.

Airtel has been paying off its spectrum dues early, reducing liabilities that were initially due between FY27 and FY32, which carried an interest rate of 10% with an average remaining term of over seven years. Telecom giants like Airtel and Reliance Jio are using cheaper financing options to clear these high-interest debts. In 2022, Jio prepaid ₹41,583 crore to the telecom department, settling all dues for spectrum bought before March 2021.