Reliance Jio has prepaid Rs 30,791 crore worth of deferred spectrum liabilities to the Department of Telecommunications (DoT). This has helped the telco clear all the spectrum dues pertaining to auctions prior to March 2021. Along with this, Jio has prepaid the deferred liabilities pertaining to the spectrum acquired in 2021 through trading of right to use with Bharti Airtel.
Jio had executed the first part or tranche of the prepayment in October 2021 for deferred liabilities pertaining to the spectrum auctions of 2016. Even though the DoT had said that the telcos could prepay their deferred spectrum liabilities on any date, Reliance Jio has cleared that in the month of January 2022 itself.
Jio Clears Deferred Spectrum Auction Liabilities That Was Due Starting FY23
The liabilities that Jio has prepaid were due starting from FY23 to FY35 in annual instalments and would have carried an interest rate between 9.30% to 10% per annum with an average residual period of more than seven years.
By making the payments now, Jio estimates that it will be able to save around Rs 1200 crores annually in interest.
This shows the kind of cash flow that Reliance Jio has been generating. Clearing complete Rs 30,791 crore of dues from its books has also helped the telco in deleveraging and save thousands of crores in interests.
Jio will have to spend thousands of crores in the upcoming 5G spectrum auctions, and it is a better way to go into the auctions with a clean slate and no huge spectrum liabilities on the shoulder.
It is worth noting that Jio had also declined the government’s offer of a moratorium on the spectrum and adjusted gross revenue (AGR) dues which is again a statement of how strong the company’s financials are.
To develop a 5G ecosystem, telecom operators will have to increase capex levels significantly, and it is expected to again create fresh liabilities, even for Jio.
