In a move that could reshape the Indian telecom landscape, Bharti Airtel has formally requested the Department of Telecommunications (DoT) to convert a significant portion of its statutory dues into equity. This development closely follows a similar decision taken by Vodafone Idea earlier, signaling a shift in how telcos are managing their mounting liabilities amid the costly 5G rollout.
This strategic proposal by Airtel comes as part of the government’s 2021 telecom reform package, which allows telecom operators to convert dues into equity offering much-needed breathing room to cash-strapped companies navigating fierce competition and rapid technological upgrades.
Airtel Eyes Relief on Rs 74,000 Crore Spectrum Burden
As of December 2024, Airtel’s spectrum dues stand at an estimated ₹74,000 crore. If converted into equity, this could significantly lighten its debt load, freeing up capital for 5G infrastructure investment, network expansion, and enhanced customer services.
Industry insiders revealed to The Economic Times that Airtel is pushing for the same treatment extended to Vodafone Idea, which saw the government increase its stake in the company from 22.6% to 49% following a dues-to-equity conversion in March 2024. Airtel, led by Sunil Bharti Mittal, argues that fair and equal support from the government is critical to maintain a level playing field across the telecom sector.
Implications for BSNL in a Rapidly Consolidating Market
As private telecom giants like Airtel and Vi reduce their financial liabilities, the pressure is mounting on Bharat Sanchar Nigam Limited (BSNL)—India’s state-owned telco, which continues to struggle with outdated infrastructure and low market penetration. With Airtel and Vi strengthening their balance sheets and pushing ahead in the 5G race, BSNL risks falling further behind.
Despite receiving a ₹69,000 crore revival package from the government to boost its 4G and 5G readiness, BSNL still holds just 8% of the market as of 2024. It continues to grapple with slow rollout timelines and limited funds compared to its private-sector counterparts.
Government’s Dual Role Raises Strategic Questions
With the Indian government becoming a significant stakeholder in both Airtel and Vi, concerns are growing about its ability to maintain impartiality while continuing to support BSNL. There’s a risk that attention and funding might shift toward private telcos, especially those that offer quicker returns on investment.
This shifting dynamic could delay BSNL’s infrastructure upgrades, making it harder to compete in urban markets where 5G deployment is accelerating. At the same time, BSNL may be left to shoulder the unprofitable responsibility of connecting rural and remote areas further straining its resources.
Possible Collaborations and Policy Levers
While the situation appears challenging, it also opens up doors for potential partnerships. Infrastructure sharing, joint 5G rollouts, or even collaborative spectrum usage between BSNL and private players could reduce costs and speed up technology adoption.
Government-driven policy tweaks could also level the field perhaps by offering BSNL easier access to spectrum or easing some regulatory burdens, allowing it to compete more effectively.
The Bigger Picture: Could Consolidation Be Next?
The government’s increasing involvement in both public and private telecom entities has sparked speculation around possible mergers or consolidations. One possibility is a merger between BSNL and Vi, given their growing alignment through government equity.
Such a scenario, however, comes with significant risks: potential job losses, dilution of BSNL’s public service mission, and political ramifications of shifting a public asset into quasi-private hands. While still speculative, this conversation reflects the fluid nature of India’s telecom sector.
What BSNL Must Do Now
For BSNL to remain relevant, speed is of the essence. Fast-tracking its 4G and 5G rollout, improving operational efficiency, and cutting legacy costs are vital next steps. It must also proactively advocate within government circles to ensure its revival package remains intact and is not diverted in light of new private sector commitments.
Leveraging its rural connectivity strength while exploring public-private collaborations may provide the dual advantage of market relevance and policy goodwill.
Airtel’s Financial Maneuvers in Focus
Separately, Airtel also prepaid ₹3,626 crore in Q3 FY25, clearing all liabilities related to spectrum acquired in 2016. It currently has approximately $479 million in perpetual notes remaining, which are callable in FY2026—another indicator of the company’s strategic approach to debt management.
Vodafone Idea: Setting a Precedent
Vodafone Idea’s total dues pegged at ₹1.34 lakh crore far exceed Airtel’s, making its equity conversion even more pivotal for survival. The move to allow the government to increase its stake was a turning point, not just for Vi but for the broader industry. It prompted conversations about fairness, financial restructuring, and telecom sector sustainability.
The telecom reforms of 2021 were designed exactly for these scenarios offering moratoriums on spectrum payments, AGR dues, and equity conversion options to ensure long-term sector viability.
Final Thoughts: Telecom’s New Era
Airtel’s request for equity conversion is more than just a balance sheet adjustment it reflects a broader shift in how India’s telecom sector is evolving. If approved, this move will not only help Airtel reduce its ₹74,000 crore dues but also sharpen its competitive edge in the high-stakes 5G landscape.
As the DoT reviews Airtel’s proposal, the outcome will be crucial not just for the company, but for the entire industry navigating the complexities of 5G, digital inclusion, and financial restructuring. For BSNL, the writing on the wall is clear: evolve, collaborate, or risk being left behind.
