The Indian telecom industry entered 2020 with a bleak financial outlook given the uncertain

ty around the payment of outstanding adjusted gross revenue (AGR) dues and a burgeoning debt pile. Telcos had to make huge provisions for AGR dues, which further weakened their account books. Moreover, the liquidity and capex requirements necessitated fresh capital injection, but the industry was extremely wary of the investment sentiment towards the sector. However, as the year unfolded, the sector witnessed some key positive developments, including the Supreme Court’s decision to allow more time to telcos to clear their past AGR dues, which helped the industry in reinstating investor confidence and attracting investments.

Jio of course emerged as the sector’s money magnet, attracting foreign investments of around Rs 1.52 trillion during the year. It all started with Jio’s mega deal with Facebook in late April, when the social networking giant agreed to acquire a 10 per cent stake for Rs 435.74 billion. Since then, key private equity players have been queuing up to pick up small stakes, for big sums, in the telco.

Besides, Airtel raised $3 billion through dual-tranche equity and foreign currency convertible bond (FCCB) offerings, considered to be the largest in the Asia-Pacific region. Vodafone Idea (Vi) too got a breather after the Supreme Court granted some relaxation in AGR payments, and announced substantial fundraising plans in 2020, which are likely to be executed in 2021. Bharat Sanchar Nigam Limited (BSNL) has already issued sovereign guaranteed bonds in line with the government’s requirements while Mahanagar Telephone Nigam Limited is likely to go for a bond issue in 2021.

On the policy front, the government gave its approval for increasing the FDI limit in the telecom sector from 74 per cent to 100 per cent. While 49 per cent of this has been allowed through the automatic route, the rest can be done through the Foreign Investment Promotion Board approval route. takes a look at the key financing deals and activities in the Indian telecom sector during 2020…


Investments in Jio Platforms

During 2020, Jio Platforms raised a total of Rs 1.52 trillion by selling a nearly 33 per cent stake (on a fully diluted basis) in the company to 13 financial and strategic investors, including Facebook, Google, Silver Lake, Vista Equity Partners, General Atlantic, KKR, Mubadala, ADIA, TPG and the Public Investment Fund (PIF). The fundraise has helped the parent group, Reliance Industries Limited (RIL), to bring down its net debt to zero much ahead of the planned March 2021 target.

Facebook’s investment of Rs 435.74 billion for a 9.9 per cent stake in Jio was the largest FDI for a minority stake in an Indian tech firm ever. The deal also helped Jio in enhancing its enterprise value for all future stake acquisitions. All the deals with Jio that followed Facebook’s investment have valued the company at Rs 5.16 trillion, a 12.5 per cent premium over the Rs 4.62 trillion enterprise value (pre-money) ascertained by Facebook. Jio’s enterprise valuation is now comparable to that of global tech giants such as Alphabet, Tencent and Alibaba. After Facebook, Google was the second largest investor in the company. The tech giant invested Rs 337.37 billion for a 7.73 per cent stake in Jio. This is Google’s biggest ever investment in an Indian company.

All the deals involved fresh equity infusion into Jio Platforms and there has been no dilution of the existing investors’ stake. Morgan Stanley acted as the financial adviser to RIL in all the deals.

Airtel’s fundraising via QIP, FCCBs and perpetual bonds

In January 2020, Bharti Airtel raised $3 billion through a combination of private placement of shares and an overseas sale of convertible bonds. Of this, the operator raised $2 billion through a qualified institutional placement (QIP) and $1 billion via FCCBs. The fundraising exercise marked the largest dual-tranche equity and FCCB offering in the Asia-Pacific region.

The QIP was priced at Rs 445 per share. The issue price was set at a discount of 1.57 per cent on the stated floor price of Rs 452.09 per equity share. As a part of the QIP process, Airtel allotted 323.5 million equity shares to eligible institutional buyers. Almost 15 global investors including Warburg Pincus, Fidelity, BlackRock, Goldman Sachs, Lambard Odier, Citigroup, Schoder, Segantii Capital, Barclays, JP Morgan, UBS and BNP Paribas invested in the QIP. Following the closure of the QIP issue, the combined holding of the promoter and promoter group, including Singtel and the Bharti Group, in Airtel reduced from 62.7 per cent to 58.98 per cent. Meanwhile, the FCCBs issued offer a coupon rate of 1.5 per cent per annum. The bonds can be converted into equity at the rate of Rs 534 per share in 2025.

Later, in February 2020, Bharti Airtel raised $250 million when its wholly owned subsidiary, Network i2i Limited, issued perpetual bonds that offer a yield of 5.65 per cent. The bond issue received interest worth more than $1.5 billion from investors such as BlackRock, Goldman Sachs, ValuePartners and UBS.

BSNL’s sovereign guarantee bond issue

In September 2020, BSNL raised around Rs 85 billion through the issuance of sovereign guarantee bonds. The telco received a total of 229 bids valued at Rs 171.83 billion, but accepted only Rs 85 billion as per the approved bond size. ICICI Prudential Bond, the National Pension Scheme, Postal Life Insurance, State Bank of India and Punjab National Bank were amongst the key participants in the bond issue. The funds raised via the bond issue will be used to partially pay off the dues of BSNL’s vendors.

Mergers, acquisitions and stake sales

Bharti Infratel’s merger with Indus Towers

After multiple delays, the Bharti Infratel-Indus Towers merger was finally completed in November 2020. The merged entity will be renamed as Indus Towers Limited. The Vodafone Group and the Bharti Airtel Group will hold a 28.12 per cent and a 36.7 per cent stake, respectively, in the merged entity.

Bharti Telecom’s stake sale in Airtel

In May 2020, Bharti Telecom, the promoter company of Bharti Airtel, raised $1.15 billion by selling a 2.75 per cent stake in Airtel. The stake was sold to select international and domestic investors through an accelerated book building process in the secondary market. The stake was allocated to more than 50 accounts, with the top 10 getting two-thirds of the overall allocation. The investors included BlackRock, Fidelity, Segantii Capital, Norges Bank and Key Square Capital, and local fund houses including HDFC Mutual Fund and SBI Mutual Fund. JP Morgan India was the sole agent for the secondary placement.

Airtel’s stake sale in Nxtra Data to Carlyle

In July 2020, the US-based Carlyle Group entered into an agreement with Bharti Airtel to buy a 25 per cent stake in the latter’s data centre arm, Nxtra Data Limited, for $235 million. The enterprise valuation of Nxtra was pegged at $1.2 billion. The acquisition was to be carried out by CA Cloud Investments, an affiliated entity of Carlyle Asia Partners. As per the agreement, Airtel will continue to hold the remaining 75 per cent stake in Nxtra. The transaction was approved by the Competition Commission of India in August 2020, post which Bharti Airtel issued shares of Nxtra Data to CA Cloud Investments.

Axiata’s exit from Vodafone Idea

In August 2020, Malaysia-based Axiata Group sold its remaining stake in Vodafone Idea Limited, marking its exit from the Indian telecom sector. Axiata had entered the Indian market in 2008 by acquiring a 20 per cent stake in Idea Cellular for a whopping $2 billion. Post Idea’s merger with Vodafone in 2018, Axiata held a 8.15 per cent stake in the merged entity. But in 2019, Axiata’s stake fell sharply to 2.48 per cent after it chose not to participate in Vi’s Rs 250 billion rights issue, and renounced its shares entitlement. Axiata’s exit leaves only SingTel and the Vodafone Group from the old time foreign investors in the sector.

Brookfield’s acquisition of Jio towers

In September 2020, Brookfield Infrastructure completed the acquisition of Reliance Jio’s telecom tower assets. An equity investment worth $3.4 billion was made by Brookfield and its institutional partners. Brookfield acquired 135,000 recently constructed communication towers that form the backbone of Reliance Jio’s telecom business.

Jio’s resolution plan for acquiring RCOM’s infrastructure assets

In December 2020, the National Company Law Tribunal (NCLT) gave its approval to Jio’s resolution plan for Reliance Communications’ infrastructure arm, Reliance Infratel, whereby Jio can acquire the tower and fibre assets of the bankrupt company. Reliance Infratel holds 43,000 towers and 172,000 km of fibre. Under the plan approved by the NCLT, lenders may recover under Rs 40 billion through the resolution plan.

Investments in Jio’s Fibre InvIT

In November 2020, the Abu Dhabi Investment Authority (ADIA) and Saudi Arabia’s PIF jointly invested $1.01 billion in the Digital Fibre Infrastructure Trust, which holds RIL’s fibre optic assets. According to RIL, ADIA and the PIF have agreed to purchase units worth Rs 37.79 billion each in the InvIT. RIL will continue as the sponsor of the InvIT, retaining a minimum 15 per cent stake, while the remaining 85 per cent can be sold to global investors, including ADIA and the PIF.


In January 2020, ITI Limited announced its plans to launch a follow-on public offer (FPO) with an expectation to generate Rs 14 billion-Rs 16 billion. The FPO, however, ran into several challenges before it was withdrawn in February citing prevailing market conditions, which led to a tepid investor response. The issue period was extended twice and the price band was also revised downwards, but the issue remained undersubscribed, post which ITI decided to withdraw the FPO. The decision was undertaken in consultation with the book  running lead managers of the issue, namely, BOB Capital Markets, Karvy Investor Services and PNB Investment Services.

Recently, in November 2020, RailTel Corporation of India Limited received the Securities and Exchange Board of India’s approval to raise around Rs 7 billion by floating an initial public offering (IPO). The IPO will comprise an initial share sale through which the government will offload 86.6 million equity shares. The company had filed its IPO papers in October 2020.

Outlook for 2021

The telecom industry’s financial troubles will be far from over in 2021. While the operational metrics, importantly ARPUs, have certainly witnessed an uptick, Airtel and Vodafone Idea still carry a huge debt burden on their books. The upcoming spectrum auctions will see telcos further investing hefty sums for acquiring airwaves in circles/bands where the spectrum is due to expire. Moreover, the telcos will need to prepare a war chest of funds to participate in the 5G auctions expected to be launched in the latter part of the year. Despite the airwaves being exorbitantly priced, one can expect aggressive bidding for acquiring the coveted 5G spectrum.

According to Anupama Arora, vice president and sector head, corporate ratings, ICRA, tariff hikes and upgradation of subscribers from 2G to 4G are expected to result in the improvement of the ARPU to around Rs 220 in the medium term. An improvement in cash flow generation, coupled with the moderation in capex intensity, will limit the dependence on incremental external borrowings for operations. However, the addition of AGR liabilities to debt and the next round of spectrum auctions will act as a dampener for the industry during 2021. s

By Akanksha Mahajan Marwah