The Department of Telecommunications (DoT) has put on hold its proposal to allow telecom operators to surrender airwaves bought before the 2022 auctions, dealing a fresh blow to Vodafone Idea. The cash-strapped telco was hoping to return some spectrum to reduce its financial burden and secure bank guarantees, according to an ET Telecom report.
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Airtel and Jio Demand Refund Mechanism
The development follows concerns raised by Bharti Airtel and Reliance Jio, which demanded a provision for refunds if the surrendered spectrum had been fully paid for. Officials cited legal complexities in altering auction rules and adjusting refunds against other levies.
"The development came amid demands by Bharti Airtel and Reliance Jio that the government have a clause for the refund of the money that they have fully paid up for the spectrum bought before 2022 but could have now surrendered," said officials aware of the matter, according to the report.
Vodafone Idea's Plan to Cut Debt Hits a Roadblock
Vodafone Idea had planned to return excess spectrum bought before 2022 and cut its government obligations by Rs 30,000-Rs 40,000 crore, depending on the quantum of spectrum returned. However, officials reportedly said that allowing the surrender of spectrum would have involved a complicated process to change the rules of auctions conducted before 2022, which was also a deterrent.
"The conditions of notice inviting applications (NIA) would have to be changed for spectrum surrender. That, too, could have been considered, but then having the provisions for refund and adjustment against other levies would have been legally difficult," the report quoted one official as saying.
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Only if Legally Supportable
The report quoted another official as saying that telecom companies were informed that the plan to surrender spectrum could only be considered if it was legally tenable.
The spectrum surrender policy was intended to apply to all operators, but Vodafone Idea would have benefited the most if implemented. Jio has minimal surplus airwaves and has already prepaid most of its past spectrum obligations. Bharti Airtel, however, holds some excess spectrum in bands like 2100 MHz in a few circles that could be returned. However, since payments are cleared in the case of surrender, the amount must be refunded.
Vodafone Idea, however, owes the government Rs 1.57 lakh crore for spectrum purchases, with the majority of dues stemming from the 2022 auctions. The telecom operator holds 8,030 MHz of spectrum across multiple bands and claims to have the highest airwaves per million subscribers in the industry.
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Vi's Recent Letter to DoT
Recently, the company wrote to the Department of Telecommunications (DoT), stating that if it were allowed to surrender spectrum acquired in auctions before 2021, its securitization or bank guarantee (BG) requirement for airwaves purchased in March 2015 would decrease from Rs 6,091 crore to Rs 2,900 crore.
Vodafone Idea also proposed alternatives to address the securitization requirement, including offsetting the 2015 shortfall using an excess payment of Rs 9,900 crore from the 2016 auction or Rs 8,800 crore paid during the 2012 and 2014 auctions. Vodafone Idea is struggling to furnish a Rs 6,091 crore bank guarantee or pay Rs 5,493 crore in cash for pending dues.
More in the Vi Series:
1. Vodafone Idea Proposes Spectrum Surrender to Cut Bank Guarantee Needs: Report
2. Indian Govt Not Keen to Raise Its Stake in Vodafone Idea, Asks to First Raise Investments: Report
3. Vodafone Idea Says It Can’t Furnish Rs 6,051 Crore BG: Report
4. Vodafone Idea Seeks Further Government Support Amid AGR Dues Pressure: Report
5. Govt Drops AGR Dues Waiver Plan, Deems Relief to Private Firms Unjust: Report
6. Vodafone Idea Fails to Provide Rs 6,090 Crore Bank Guarantee to DoT: Report
