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Bharti Airtel Seeks Equity Conversion
How Airtel’s Equity Conversion Request Opens a Pandora’s Box
Context: Days after Communications Minister Jyotiraditya Scindia ruled out further equity conversion for Vodafone Idea (Vi), Bharti Airtel has surprised the industry by requesting the Department of Telecommunications (DoT) to convert around ₹40,000 crore of its adjusted gross revenue (AGR) dues into equity.
Why Bharti Airtel Is Seeking Equity Conversion
- Last week, Bharti Airtel submitted a request to the DoT seeking the conversion of its deferred AGR dues into government equity, leveraging the same provisions of the 2021 telecom reforms package that benefited Vodafone Idea.
- If approved, the government would acquire a 3–4% stake in Bharti Airtel.
- Analysts suggest that since Airtel has robust financials and a strong stock market performance, the government could easily sell this stake later at a profit.
- Under the September 2021 telecom reforms package, telecom operators were granted:
- A four-year moratorium on statutory dues like AGR and spectrum payments (with interest accumulation).
- An option to convert the interest on deferred payments into equity.
- Vodafone Idea chose both the moratorium and equity conversion.
- Airtel, however, initially opted only for the moratorium.
- Now, as the moratorium nears its end (repayments begin from September 2025), Airtel’s strategic move seeks to clear liabilities, reduce interest costs, and free up capital for network upgrades.
- DoT officials have clarified that equity conversion requests will be evaluated case-by-case, without automatic approvals.
How the Government Helped Vodafone Idea with Its Dues
- Vodafone Idea’s financial distress prompted government intervention twice:
- February 2023: The government converted ₹16,133 crore of Vi’s interest dues into equity, becoming its largest shareholder with a 33% stake.
- March 2025: An additional ₹36,950 crore of Vi’s spectrum dues were converted, increasing the government’s stake to 48.99%.
- Following a successful ₹18,000-crore follow-on public offering (FPO), the government’s holding was diluted to 22.6%.
- However, Vi’s long-term prospects remain uncertain.
- With a massive debt burden of ₹2.27 lakh crore — ₹1.57 lakh crore in spectrum dues and ₹70,300 crore in AGR liabilities — Vodafone Idea must significantly boost its Average Revenue Per User (ARPU) from ₹163 to over ₹380 by FY28 to survive.
- The government has made it clear it will not raise its stake beyond 49% nor inject new capital, avoiding a situation where Vi becomes a state-run entity.
Why Airtel’s Move Could Be a Game-Changer
Airtel’s request is strategically timed ahead of the moratorium’s end. If the government approves the equity conversion:
- Airtel would settle its entire AGR liability.
- It would significantly cut future interest costs.
- It could redirect funds towards expanding its 5G network and enhancing services.
- Already, Airtel has strengthened its finances by prepaying ₹5,985 crore to settle its 2024 spectrum auction dues, reducing its outstanding spectrum debt to ₹52,000 crore. In total, Airtel has prepaid ₹66,665 crore in spectrum liabilities, easing its debt burden and improving cash flow.
What Lies Ahead for the Telecom Sector
- Airtel’s equity conversion request places the government in a tricky spot.
- After having rescued Vodafone Idea twice, rejecting Airtel could seem unfair, especially under the non-discriminatory intent of the 2021 reforms.
- If Airtel’s request is accepted:
- It may set a precedent for other telecom operators like Reliance Jio, which has spectrum dues but no AGR liabilities.
- The government could end up owning stakes in multiple private telecom companies, conflicting with the spirit — if not the letter — of the reforms package.
- Moreover, there’s a looming possibility that Vodafone Idea might again seek assistance as repayment deadlines approach.
Balancing financial stability, maintaining a three-player private telecom market, and preserving policy integrity, the government faces a critical decision that could reshape India’s telecom landscape.
