Reliefs for telco sector in India a boon for Airtel, says Singtel CFO

BHARTI Airtel, Singtel's Z74 joint-venture company, will now be in a better cash flow position to take advantage of emerging trends such as 5G and the home broadband market in India, said the group's chief financial officer Arthur Lang on Thursday.

This comes after the country's federal Cabinet approved a telecoms sector relief package on Wednesday. The package includes a redefinition of the adjusted gross revenue (AGR) to count only telecoms revenue, significantly reducing the amount of AGR payments from telcos to the government going forward.

As the changes will only apply going forward, Airtel will still be on the hook for a further 259.76 billion rupees (S$4.75 billion) in AGR payments, after already paying 180 billion rupees. There will be a four-year deferral of these payments as well.

Still, Mr Lang called the news a "game-changer" and said that the move frees up a "tremendous" amount of free cash flow for the company to grow its business by investing in its 5G network as well as its fibre broadband network, which has seen demand grow exponentially due to work from home arrangements.

"Given Airtel's healthy balance sheet, we see Airtel emerging a stronger player on the back of these reforms which pave the way for it to become a sustainable contributor of profit to Singtel," he added.

For the quarter ended Sep 30, 2019, Singtel recognised an exceptional loss of S$1.93 billion before taxes in its financial results from Airtel's exceptional loss of approximately S$5.49 billion. This was due to the Indian Supreme Court's ruling then on the AGR's definition to include non-telecoms revenue.

Aside from structural reforms, other measures include a four-year moratorium on airwaves payments due to the government, as well as the lifting of usage charges of airwaves in future auctions. Carriers will also be able to hold airwaves for 30 years from the current 20 years and share spectrum between carriers for free.

Citi analysts Arthur Pineda and Hussaini Saifee said that the relief package would help reduce Airtel's upfront cash burden and reduce pressure on its US$2.8 billion recapitalisation plan, in which Singtel would have had to participate in as well.

The company's board had earlier approved the fund-raising on Aug 29 through a rights issue at a price of 535 rupees per share.

As of the quarter ended June 30, 2021, Singtel holds a 31.7 per cent stake in Airtel. Airtel's pre-tax profits of S$64 million also made up 12.5 per cent of Singtel's regional associates' pre-tax profits in the same period.

Singtel shares closed up 0.8 per cent or S$0.02 at S$2.40 on Thursday.

READ MORE:

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• India Supreme Court approves payment plan for telcos including Bharti Airtel