Bharti Airtel is reportedly contemplating a fundraise of around $1 billion (around ₹8,330 crore) to prepay a significant portion of its remaining spectrum dues from the 2015 auction.

What Happened: The second-largest telecom operator in India is exploring various options, including a potential offshore bonds issue, the Economic Times reported, citing sources. Airtel is expected to engage with top global banks such as Barclays and Citi to decide on the preferred fundraising mode and pricing.

The telecom company, led by Sunil Mittal, aims to clear about ₹12,000 crore of deferred liabilities, which include a 10% annual interest, related to spectrum purchases in the 2015 auction. Discussions with foreign banks are set to commence soon, focusing on determining the specific financial instrument and its pricing for the proposed offshore fundraise.

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Why It Matters: Refinancing the high-cost spectrum debt will enable Airtel to reduce annual interest costs, strengthen its balance sheet and enhance cash flows. This move comes as Airtel rapidly expands its 5G coverage and prepares to offer next-gen mobile broadband services nationally in the coming months.

Airtel CFO Soumen Ray indicated during the September quarter earnings call that the company still has about ₹10,000-12,000 crore of dues remaining from the 2015 spectrum auction, which it intends to pay down. Airtel may consider accessing a portion of its remaining rights issue proceeds to prepay some of the 2015 spectrum auction dues, if necessary, a source told the business daily.

In the 2015 auction, Airtel acquired 111.6 megahertz of spectrum for ₹29,130.20 crore, with ₹7,832.58 crore paid upfront. The telecom company has already made two rounds of prepayments in March 2022 and July 2023, leveraging lower-cost financing avenues.

As Airtel prepares for significant capex in FY24 due to ongoing 5G rollouts and rural expansion, the proposed offshore fundraise is expected to replace high-cost spectrum debt.

Price Action: Bharti Airtel’s share price inched up 0.3% to ₹964.2 in the early hours of trading on Tuesday.

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