Indian telecom operator Bharti Airtel, which recently posted its highest ever quarterly loss, is now planning to raise US$3 billion to clear its statutory dues and debts. In the second quarter of the current fiscal year, it posted a loss of 230 billion rupees ($3.2 billion) due to provisions made for an unfavorable court verdict over adjusted gross revenue.
The company headed by billionaire Sunil Mittal has provided 284 billion rupees as a charge to pay higher adjusted gross revenue for this quarter. It still has to pay 430 billion rupees as dues to the government.
The Indian Supreme Court on October 24 ruled that even non-core activities should be taken into account while calculating adjusted gross revenue, to be paid to the government. The court gave the firm three months to clear the dues.
However, the government last month provided Indian telecom companies an option to avail of a two-year moratorium on payments they were supposed to make in yearly installments for the spectrum bought in auctions. This provided much-needed relief to the debt-stricken companies.
According to the regulatory filing, Bharti Airtel will raise $2 billion through a qualified institutional placement (QIM) and public or private offerings of equity shares. A QIM is a way for listed companies to raise capital without having to submit legal paperwork to market regulators. The company will raise an additional $1 billion through debentures and bonds. The company’s board has authorized a special committee of directors to take necessary steps for implementing the fundraising plans.
Fortunately for the company, the three-year-long price war started by Reliance Jio in 2016 has come to an end. The predatory pricing unleashed by Reliance Jio, promoted by India’s richest man Mukesh Ambani, disrupted the industry and players such as Tata Group had to close shop. Even Reliance Communication, owned by Mukesh Ambani’s younger brother Anil Ambani, had to wind up its operations. Vodafone India merged with Idea Cellular to stay in business.
Currently, there are only three privately owned telecom companies in India – Bharti Airtel, Vodafone Idea and Reliance Jio. State-owned Bharat Sanchar Nigam is also bleeding and the government recently announced a plan to shed 50% of its workforce.
The surviving telecoms have now decided to raise tariffs. Bharti Airtel hiked prices of its prepaid plans by 10-40%. The company said it had increased tariffs in the range of 50 paise per day to 2.85 rupees.
Airtel’s popular bundle plans offering unlimited calling and data that were earlier priced at 249 rupees (28 days’ validity) and 448 rupees (82 days’ validity) will now cost 298 and 598 rupees respectively. The tariffs for postpaid consumers remain unchanged. This move is expected to increase the company’s average revenue per user and improve its finances.
Meanwhile, Bharti Airtel, Vodafone Idea and Reliance Jio have asked the Telecom Regulatory Authority of India to set up floor pricing for data services as early as possible.
The cellular operators said they felt that under the prevailing competitive environment no player would voluntarily raise prices, hence they wanted the regulator to prescribe a minimum tariff for data services. They said the prices for voice services should remain low as they are essential.
According to price comparison site Cable.co.uk, India has the cheapest mobile data in the world, with 1 gigabyte costing just 18.5 rupees (26 cents), compared with the global average of about 600 rupees ($8.38). In the UK it is $6.66 and in the US it is $12.37.