Reliance Jio Clears Rs.30,791 Cr Deferred Spectrum Dues

In a move intended to save on annual interest costs, Reliance Jio paid off the entire deferred spectrum dues to the government in one shot. The total amount paid by Reliance Jio was Rs.30,791 crore and with this payment there are no dues pending for Reliance as far as deferred spectrum charges are concerned. With this payment, Reliance has cleared all deferred spectrum dues payable up to March 2021 auctions.

In the last 2 years, Reliance has raised a huge amount of funds by placing stakes worth billions of dollars in Jio Platforms and in Reliance Retail with global PE investors and strategic investors. In addition, RIL has also raises Rs.52,300 crore via rights issue, which was also a huge success. It has already reduced the net debt of RIL to zero and has now also cleared the deferred spectrum dues.

These pertain to all spectrum allocations made to Reliance Jio between the years 2014 and 2016. It also includes the spectrum acquired by Reliance Jio via right to use agreements with Bharti Airtel. It may be recollected that in Dec-21, Bharti had used proceeds from its rights issue to prepay Rs.15,514 crore of spectrum dues to the government. These pertained to the 2014 spectrum purchases from the Bharti Airtel group.

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However, this does not include the spectrum in the 800 MHz, 1800 MHz and 2300 MHz that Reliance Jio had purchased last year for Rs.57,123 crore. Out of this amount Rs.19,939 crore had been paid upfront by Reliance Jio and the balance amount of Rs.37,184 crore is still pending. Other than this specific spectrum, all other previous dues have been cleared by Reliance JIO.

The liabilities that Reliance had to pay towards old spectrum dues were payable between FY23 and FY in instalments. However, this would have entailed interest payment at a rate between 9.3% and 10%. The interest cost on these deferred spectrum payments itself amounts to approximately Rs.1,200 crore per annum. By saving the interest amount annually, Jio will be in a much better position to leverage the balance sheet.

In December 2021, the Department of Telecommunications (DOT) had, as part of the special telecom package, given telecom companies the flexibility to prepay their deferred spectrum liabilities on any date and save interest from that day onwards. RIL will get an annual saving of Rs.1,200 crore as interest by prepaying these deferred spectrum charges.

Spectrum payments are normally made in a deferred manner over a period of 18 years. This includes 2 years moratorium and a 16 year repayment period.