Bharti Airtel has requested the Department of Telecommunications (DoT) to ensure a non-discriminatory framework in any potential waiver of spectrum bank guarantees (BGs), amidst Vodafone Idea's appeal for financial relief. Airtel has reportedly asked the DoT to treat all players equally, irrespective of their "financial health", according to an ET report.
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Airtel’s Request to the DoT
In a letter to the DoT, Airtel said it supports the proposed waiver, but any regulatory reform must have a "non-discriminatory" framework across all telcos, without considerations such as the financial health of particular operators, the report said, citing officials aware of the development.
Vodafone Idea's Financial Struggles
Vodafone Idea, citing significant financial challenges, is reportedly seeking the waiver to alleviate the need for BGs, which it expects would enable banks to extend more credit to the struggling company. The telco must submit BGs totalling approximately Rs 24,700 crore in the coming months, compared to Airtel's Rs 3,000 crore and Jio's Rs 4,000 crore requirements.
According to the report, Airtel highlighted that it, too, has invested heavily in spectrum acquisitions and will soon need to provide BGs for airwaves obtained in auctions before 2021. The Cellular Operators Association of India (COAI) has also called for the elimination of BG requirements for auctions conducted prior to 2022.
Airtel reportedly cited the 2021 telecom reforms, which treated all the telecom players equally with no special benefit to any one company.
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The DoT has proposed that, if approved, the waiver would allow telecom companies to bypass BGs by agreeing to pay an additional three months' amount as a security for the following year's payments. This proposal, awaiting cabinet approval, could benefit all operators but would primarily aid Vodafone Idea, given its substantial BG obligations.
Impact of Spectrum Bank Guarantees
Vodafone Idea, which has raised Rs 24,000 crore through equity, is now looking to secure an additional Rs 25,000 crore through loans and another Rs 10,000 crore via bank guarantees or letters of credit. This funding is crucial for the company to maintain its capital expenditures and effectively compete against Airtel and Jio. However, banks have been hesitant to provide credit due to the telco's strained financial situation, insisting on more corporate guarantees.
Also Read: PNB Turns Down Vodafone Idea’s Request for Fresh Financing: Report
Reactions from Financial Institutions
Punjab National Bank (PNB) has reportedly declined Vi's request for fresh lending. Furthermore, PNB said they may consider lending to any telecom company with a AAA rating. This follows Power Finance Corp (PFC) and its subsidiary, Rural Electrification Corp (REC), which have also reportedly rejected Vodafone Idea's long-term loan proposal, citing mismatches with internal underwriting guidelines and concerns about the collateral offered.
According to recent reports, banks are hesitant to lend to Vi following the Supreme Court ruling.
