Telecom sector seeks deferral of spectrum payment from Govt

Nilanjan Roy, Chief Financial Officer of Bharti Airtel was quoted by Bloomberg as saying, “The industry will engage with government to seek deferral of dues. We need to see if spectrum payments can be deferred as interest costs has risen on higher spectrum related costs.”

Net interest costs of Airtel has risen to Rs 1,908 crore from Rs 1,524 crore in Q4FY16 largely due to increased spectrum related interest costs. Photo: Bharti Airtel Official Website

India's largest telecom company Bharti Airtel in an earnings conference held on Wednesday, said that the industry needs to see if spectrum payments to the government can be deferred.

Nilanjan Roy, Chief Financial Officer of Bharti Airtel was quoted by Bloomberg as saying, “The industry will engage with government to seek deferral of dues. We need to see if spectrum payments can be deferred as interest costs has risen on higher spectrum related costs.”

Net interest costs of Rs 1,908 crore have risen from Rs 1,524 crore in the corresponding quarter last year – largely due to increased spectrum related interest costs

The company in its fourth quarter ended March 31, 2017, result, witnessed Rs 1547.66 crore decline to Rs 89,031.79 crore compared to Rs 90579.46 crore in the preceding quarter.

However, Bharti Airtel said if deferred payment liabilities to the DOT and finance lease obligations were excluded, then the net debt has decreased to Rs 46,246.75 crore from Rs 48,325.05 crore in the previous quarter.

Spectrum payment has been concerning major telecoms as their free cash flow comes under pressure.

Tanu Sharma, Associate Director, India Ratings, in a report titled 'Spectrum Payouts and Network Capex to Keep Telcos’ FCF Negative' said that the debt burden will rise for the top telecom companies with an increase in spectrum and non-spectrum debt expenditure.

"Additionally, with the upfront spectrum payouts in FY17, the network capex needs to be ramped up, which will keep FCF negative," she said.

In the month of October 2016, major telecom made spectrum payment of Rs 31,987 crore to Department of Telecom (DoT) with highest payments made by Vodafone and Bharti Airtel.

DoT received upfront spectrum payment of Rs 10,139 crore from Vodafone, followed by Bharti Airtel with Rs 7,122 crore and Idea Cellular with payment of Rs 6,398 crore.

Reliance Jio whose offers have been haunting Airtel's revenue growth, had made spectrum payment of Rs 5930 crore.

Gopal Vittal, MD and CEO, India & South Asia said, “The sustained predatory pricing by the new operator has led to a decline in revenue growth for the second quarter in a row. The telecom industry as a whole also witnessed a revenue decline for the first time ever on a full year basis.”

The company witnessed consolidated net profit of Rs 373 crore, a decline of 71.7% compared to Rs 1,319 crore in the corresponding period of the previous year.

Also, consolidated revenue saw decline of 12.1% at Rs 21,935 crore this Q4, as against Rs 24,960 crore a year ago same period.

Bharti Airtel feels the acquisition of Telenor operations and Tikona’s business will further strengthens the Pan India spectrum footprint.

On BSE, Bharti Airtel shares ended at Rs 372.70 per piece up by Rs 27 or 7.87%.

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