 "Telecom tower")
Bharti Airtel's contingent liabilities have more than doubled in the last five years, with the most significant component being the one-time spectrum charge (OTSC) dues, The Economic Times (ET) has reported. This is due to the demands raised by the Department of Telecommunications (DoT).
IIFL Securities was quoted in the ET report as saying, "Airtel's contingent liabilities about DoT claims have seen a sharp jump year-on-year, from Rs 4,100 crore in financial year 2017-18 (FY18) to Rs 11,500 crore in FY23, (and) the largest component within this is OTSC."
What is a contingent liability?
A contingent liability can arise due to the outcome of a specific event. It is defined as a possible outcome which may or may not arise. A contingent liability is recorded when it can be estimated, otherwise, it should be disclosed.
Also Read: Expecting high demand, QSRs, retail companies expand their workforce
Also Read: Expecting high demand, QSRs, retail companies expand their workforce
Last month, in a regulatory filing with the BSE, Bharti Airtel informed that its OTSC dues stood at an astonishing Rs 15,178 crore. "Of this, around Rs 8,500 crore has been provided for, while Rs 6,600 crore is part of contingent liability," the ET report cited IIFL as saying.
What is OTSC?
OTSC case goes back 11 years. It is a legal battle between the government and the telecom companies over statutory dues. The matter is pending before the Supreme Court and Bombay High Court. The case has its origins in the government's decision when it decided to impose OTSC on telcos shortly after the Supreme Court cancelled 122 telecom permits in 2012 in connection with the 2G scam.
Following this, the cabinet cleared OTSC, saying all spectrum allocated beyond 4.4 MHz/circle would be charged at market rates. Telcos took the matter to the court.
Also Read: Leasing data shows BFSI sector has bounced back from pandemic lull
Troubled Vodafone Idea (VI) has around Rs 7,000 crore in the form of OTSC dues. According to the company's latest BSE filing, the company's dues are around Rs 6,921 crore. This includes Rs 3,322 crore dues of the erstwhile Idea Cellular.
