Bharti Airtel Sets Aside Rs 28,450 Crore For AGR Dues, Sees Uncertainty Ahead

Bharti Airtel Ltd. reported a loss of Rs 23,045 crore in the September quarter as it provided for dues pending to the government related to the 14-year-old adjusted gross revenue court dispute.

The Sunil Bharti Mittal-led firm said the company has provided Rs 16,815 crore towards licence fee that is payable, while Rs 11,635 crore has been kept aside for spectrum usage charges payable based on the definition of AGR, it said in its media statement. Overall, the company has provisioned Rs 28,450 crore as a one-off expense.

The company’s management is reviewing options and remedies available based on AGR decision, the media statement said. The company will require significant additional financing to discharge its obligations, it said.

“There can be no assurance of success of management’s plans to access additional sources of finance to the extent required, on terms acceptable to Group, and to raise these amounts in a timely manner,” Bharti Airtel said.

The telecom operator also sees “material uncertainty whether the company will be able discharge its liabilities” in normal course of business. “This uncertainty may cast significant doubt on the Group’s ability to continue as a going concern.”

India’s second-largest telecom operator was supposed to announce its earnings on Oct. 29, but postponed it to Nov. 14 due to an adverse outcome in the AGR case. The operator was approaching department of telecommunications to seek clarity on the total amount involved and request for support to deal with the adverse outcome, it said in an exchange filing.

It, however, announced some operational highlights which, according to analysts, were “robust”.

Key Earnings Highlights

  • Net revenue rose 1.89 percent sequentially to Rs 21,131 crore.
  • Operating profit increased 6.9 percent to Rs 8,860 crore.
  • Margin expanded 200 basis points to 41.93 percent.
  • Loss before exceptional items and taxes contracted to Rs 623 crore from Rs 1530 crore in the previous quarter.

Telecom operators are liable to pay around 4 percent and 8 percent of the AGR as spectrum usage charges and licence fees, respectively, to the telecom department. The operators were arguing that AGR should comprise revenue from telecom services, but the department insisted that AGR should include all revenue earned by an operator, including that from non-core telecom operations.

Analysts said telecom operators are incapable of paying thousands of crores as dues and penalties as they continue to bleed from a tariff war unleashed by billionaire Mukesh Ambani’s Reliance Jio Infocomm Ltd.

Analysts expect the government to support the industry in various forms by reducing licence fees and spectrum usage charges, increasing moratorium on annual spectrum payment, deferring zero-IUC (interconnect usage charge), refund/adjust accumulated credit against future tax pay-outs and introduce floor price for voice calls or mandate price increases.

The government support could also be in the form of waivers of certain penalty/interest amount. A committee of secretaries under the cabinet secretary was formed to examine the financial stress faced by India’s telecom operators and recommend a package for the sector, according to a government official.

Earlier this month, the telecom operator had released operational highlights for the September-ended quarter that showed a decline in its average revenue per user for the first time in a year.―Bloomberg Quint

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