In a major relief to the telecom industry, especially Vodafone Idea (Vi), the Department of Telecommunications (DoT) has waived the requirement for Bank Guarantees (BGs) for spectrum auctions held prior to the 2021 telecom reforms. Vodafone Idea in a statement on Saturday, December 28, hailed this move by Government, saying, "Government's BG relief to telecom industry will boost 4G and 5G investments in India."
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Waiver of Bank Guarantees (BGs)
"We wish to inform you that DoT vide its communication dated 27 December 2024, has dispensed with the requirement of submission of Financial Bank Guarantees for the Spectrum acquired in Spectrum Auction held in 2012, 2014, 2015, 2016 and 2021, subject to certain terms and conditions," Vi confirmed in an exchange filing.
This move extends the benefit previously granted to post-reform auctions and covers auctions conducted in 2012, 2014, 2015, 2016, and 2021, subject to specific conditions. The waiver applies where the pro-rated value of spectrum usage until three months after the next instalment due date is less than the payments made by telecom operators on a Net Present Value (NPV) basis.
For Vodafone Idea Limited (VIL), this reform eliminates the need for BGs worth around Rs 24,800 Crore for instalments in auctions conducted in 2012, 2014, 2016, and 2021. However, a partial shortfall remains for the 2015 auction, which is being discussed with the DoT to finalise.
"Prior to this reform, BGs aggregating to around Rs. 24,800 Crore were required to be provided by VIL against each spectrum instalment, 13 months prior to the installment falling due for the above auctions. As per our understanding of the terms and conditions, out of all the 5 auctions mentioned above, no BGs will be required to be provided by VIL for the 2012, 2014, 2016 and 2021 auctions," Vi said.
Towards 4G and 5G Expansion in India
"We are in discussion with the DoT to determine the final amount of this partial shortfall for the 2015 auction," Vi said, adding," This step of BG waiver is a clear indication of the Government’s continued support to the telecom industry. It will ensure that the exposure of the banking system is utilised by telecom operators towards further proliferation of 4G and 5G networks in India."
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Vodafone Group's Debt Clearance
In another development, UK-based Vodafone Group has cleared dues of around Rs 11,650 crore (approximately 109 million pounds) that it had raised against shares of Vodafone Idea, according to a regulatory filing dated December 28. Vodafone Group had pledged almost its entire stake in VIL to secure the debt. The pledge was created in favour of HSBC Corporate Trustee Company (UK) for the debt raised by Mauritius- and India-based entities of Vodafone Group.
"The Vodafone Promoter Shareholders collectively hold 15,720,826,860 equity shares of the Target Company comprising approximately 22.56 percdnt of the equity share capital of the Target Company," the filing said.
"On 27 December 2024, HSBC Corporate Trustee Company (UK) Limited acting as the security trustee for the lenders has released the pledges pursuant to repayment of the outstanding dues owed to the lenders by the Vodafone Promoter Shareholders.
"Consequently, the indirect encumbrance on 15,720,826,860 equity shares of the target company held by the Vodafone Promoter Shareholders representing 22.56 per cent of the equity share capital of the target company on a fully diluted basis has been released," the filing added.
