New Delhi: The department of telecom (DoT) may take a favourable view on waiving bank guarantees due from telcos for spectrum purchased till 2022, a move that could help the beleaguered Vodafone Idea Ltd the most.
Prior to 2022, telcos had to submit a bank guarantee while buying spectrum, a rule designed to ensure they make regular annual payments for the airwavespurchased.
The demand for a waiver was under consideration, according to two senior officials in the department. There was room to allow relief since the 2024 auction did not have the requirement, one of the officials said on the condition of anonymity.
“A precedent to this effect also exists, when the government in 2017 agreed to increase the number of annual payments for spectrum bought in prior auctions, from 10 to 16 years. A lower interest on penalties was also agreed upon by the government,” another official said, also asking not to be named.
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Vi will be the biggest beneficiary of such a waiver as it’s supposed to arrange for bank guarantees worth ₹27,000 crore within the coming couple of months. It is saddled with statutory dues worth ₹2.1 trillion that prevented it from investing in 4G and 5G networks. Having raised funds from equity, executives at the No 3 carrier said at an investor call that its discussions with the government on waiving the guarantees were developing positively, with solutions expected in the coming weeks. Any relief will only help the loss-making company improve its financial position.
Vi will be the biggest beneficiary of such a waiver as it’s supposed to arrange for bank guarantees worth ₹27,000 crore within the coming couple of months.
The DoT will require a nod from the Cabinet and an amendment to the Notice Inviting Applications, the legal document that lays down the rules and process of auction, to approve the bank guarantee waiver, the first official said. The NIA needs to be amended since the payments are for previous auctions.
Officials said that while the proposal was under discussion and informal meetings with the operators seeking the waiver were being held, a formal decision was yet to be taken.
Emailed queries to the department of telecom remained unanswered.
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According to the new NIA for the 2024 auctions, telecom operators don’t need to submit financial and performance bank guarantees under the reform measures for the telecom sector taken in 2021.
Bharti Airtel, Vodafone Idea and Reliance Jio asked the telecom department to also consider waiving the requirement for the spectrum bought prior to 2022. The carriers argued that the money could instead be channelled towards improving networks.
“Creditworthiness of the service providers was consistent, whether it is for past or future spectrum auction payments. Further, continuing with this requirement unnecessarily blocks the working capital of the telcos, inhibiting investments in network rollout to deliver ubiquitous coverage and connectivity to Indian citizens,” the Cellular Operators Association of India said in a letter to Neeraj Mittal, secretary of the department of telecommunications, seen by Mint.
The operators said the investments into networks would go towards meeting the government’s vision of providing competition and customer choice for inclusive development and bringing the marginalized areas into the mainstream, besides universal broadband access to connect the unconnected.
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