Vodafone Idea (Vi) reportedly failed to pay its second bank guarantee (BG) of approximately Rs 350 Crore, due on November 1, for spectrum acquired in a 2012 auction. This comes after the telecom operator, India's third-largest, missed a BG payment exceeding Rs 4,600 Crore in September for spectrum bought during the 2016 auction, ET reported, citing officials familiar with the matter.
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Government's Decision on BG Waiver Awaited
The Department of Telecommunications (DoT) is unlikely to take any penal action against the struggling telco until a decision is made on its proposal to waive BG requirements for spectrum auctions, the report added.
"The draft Cabinet note on the waiver has been prepared and circulated and it will be sent for approval soon," an official was quoted as saying. Another official reportedly mentioned that the law ministry and the finance ministry are yet to reply on the note but it might still be sent to the Cabinet to take a final call on the matter.
Vi’s next BG payment is due in February. The company is required to submit a total of approximately Rs 24,700 Crore in BGs over the coming months for past spectrum auctions.
"The 2021 reforms package did away with the requirement to provide bank guarantees for spectrum acquired in future auctions. The industry through COAI has sought removal of bank guarantees requirements for spectrum acquired prior to 2022. We understand that this industry ask is being considered by the government," a Vi spokesperson said in response to a query about the BG payments, according to the report.
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Competitors' Liabilities in Comparison
Vi initially pushed for a BG waiver, a move supported by other telecom operators. However, a favourable government decision on this matter would largely benefit Vi. While competitors Bharti Airtel and Reliance Jio are also required to submit BGs for past auction payments, their liabilities are significantly lower than Vi's.
For instance, Airtel's BG for the 2016 auction, due in September next year, amounts to approximately Rs 2,200 Crore. Jio's BG, around Rs 4,400 Crore, is due after Airtel. According to the report, Vi had cited its financial troubles to seek the waiver-a move which, it expects would give banks more headroom for extending credit to the company.
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Bank Caution Amid Vi's Financial Stress
Vi recently raised Rs 24,000 crore through equity and now aims to raise an additional Rs 25,000 crore via loans, along with Rs 10,000 crore in BGs or letters of credit, to fund its capex plans and compete with Airtel and Jio. However, banks remain cautious due to its stressed financial position, demanding more corporate guarantees to extend any credit.
