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This resolution follows the 2021 Cabinet reforms, which had already eliminated the BG requirement for spectrum bought going ahead
The Union Cabinet has accepted a waiver of financial institution ensures for telecom firms
The Union Cabinet has accepted the waiver of bank guarantees (BG) for telecom operators on spectrum bought earlier than 2022, offering vital reduction to firms like Vodafone Idea, which owes over Rs 24,700 crore in BGs, in accordance with sources. Indian telecom operators, together with Airtel and Vodafone Idea, collectively face BG obligations exceeding Rs 30,000 crore.
This resolution follows the 2021 Cabinet reforms, which had already eliminated the BG requirement for spectrum bought going ahead. By extending this reduction to older spectrum holdings, the federal government goals to alleviate monetary pressures within the telecom sector and improve its stability.
Vodafone Idea has constantly highlighted its monetary challenges, urging the federal government to get rid of the BG requirement to ease its spectrum cost burden. The firm argued that such a waiver would facilitate further credit score from banks, providing essential monetary help.
The firm not too long ago didn’t pay a second BG of about Rs 350 crore, which was due on November 1, for spectrum bought in a 2012 public sale. This adopted a missed cost of over Rs 4,600 crore for a BG associated to a 2016 spectrum public sale in September.
Vodafone Idea has raised Rs 24,000 crore via fairness and is now aiming to safe one other Rs 25,000 crore in loans and Rs 10,000 crore in BGs or letters of credit score. These funds are important for the corporate to proceed its capital expenditure and compete with Airtel and Jio.
However, banks stay cautious, adopting a wait-and-see strategy attributable to Vodafone Idea’s burdened monetary place and are requesting extra company ensures earlier than extending additional credit score.
The BG situation grew to become distinguished after the Department of Telecommunications (DoT) returned all BGs in late 2021, as no installment was due for 35 months. The telecom reforms of September 2021 supplied telecom firms with a four-year moratorium on spectrum charges and adjusted gross income (AGR) dues.
Vodafone Idea Shares Rally
Shares of Vodafone Idea Ltd (VIL) climbed 18 per cent in Tuesday’s commerce, with Bharti Airtel Ltd additionally rising 1 per cent.
Following the event, Vodafone Idea shares climbed 18 per cent to hit a excessive of Rs 8.09. Despite this, the inventory is down 7 per cent prior to now one month.
Vodafone Idea’s web debt (excluding leases, however together with curiosity accrued and never due) elevated Rs 9,300 crore sequentially in Q2 to Rs 2.12 lakh crore on dues compensation to distributors/banks and in addition spectrum acquisition. VIL owed Rs 2.23 lakh crore to the federal government for deferred spectrum (Rs 1.52 lakh crore) and AGR dues (Rs 70,300 crore).
In a November 15 observe, Nomura India mentioned the important thing takeaways from the post-results convention name with the Vodafone Idea administration indicated that VIL has primarily misplaced its subscribers to BSNL attributable to tariff hikes introduced in July 2024 however the development has began reversing from August onwards.
The Vodafone Idea administration expects the complete impression of tariff hikes to be mirrored over the subsequent two quarters. VIL will begin 5G rollout in key geographies by Q4FY25, the administration instructed including that VIL’s targets to extend 4G inhabitants protection to 120 crore by September 2025E.
VIL added 42,000 4G websites and shut down 19,700 3G websites in Q2FY25. The capex was guided at Rs 8,000 crore for 2HFY25 and Rs 50,000-55,000 crore over the subsequent three years.
“Vi has written to the DoT to waive off financial institution assure (BG) requirement price Rs 24,700 crore (to be submitted from September 2024 to February 2025) to securitise spectrum installments. We imagine Vi’s debt elevate can be contingent on securing BG waivers,” MOFSL mentioned in an earlier observe.
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