Vodafone Idea may get relief as DoT considers waiving bank guarantees

Once the DoT's draft note receives Cabinet nod, telecom operators will no longer need to provide bank guarantees for securing deferred spectrum payment instalments

In a potential relief for Vodafone Idea (Vi), the Department of Telecommunications (DoT) has drafted a Cabinet note proposing the elimination of bank guarantees for securing deferred spectrum payment instalments, according to a report by The Economic Times. 

This move, which is still subject to certain conditions, comes in response to a request made by the financially struggling telecom operator.

Once the draft is approved by the Cabinet, telecom operators will no longer need to provide bank guarantees. However, they will be required to make an additional payment covering three months beyond the annual instalment, which will act as a security measure for the following year’s dues, as per the report. 

 

Business Standard could not independently verify these claims.

The DoT’s proposal reportedly specified that the waiver will be applicable for spectrum auctions held in 2012, 2014, 2015, 2016, and 2021, given the companies involved agree to the terms, The Economic Times report said.

The draft note has already been shared with the law and finance ministries, and their feedback is awaited. If the waiver is receives Cabinet nod, it would also benefit other telecom companies like Reliance Jio and Bharti Airtel. Jio’s annual bank guarantee requirement is estimated at Rs 4,000 crore, while Airtel’s is around Rs 3,000 crore.

Vodafone Idea’s spectrum payment deadlines approaching

Vodafone Idea’s moratorium on spectrum auction dues is set to expire in October 2025, with the submission of bank guarantees required 13 months prior to the due date. Vi was originally scheduled to submit bank guarantees in phases, starting with a payment of approximately Rs 4,300 crore for the 2016 auction by September 20. However, the telecom company missed this deadline, prompting the DoT to issue a notice.

In total, Vodafone Idea needs to provide the government with bank guarantees amounting to Rs 24,700 crore over the coming months. 

Industry-wide impact

In August, the Cellular Operators Association of India, representing private telecom companies, submitted a request to the DoT to eliminate the bank guarantee requirement for spectrum auctions held before 2022.

Initially, the DoT had rejected this request, citing the binding terms of the notice inviting application for each auction. But the proposal resurfaced after considering Vi’s financial constraints and the telecom sector reforms introduced in 2021, which had already reduced the need for bank guarantees in auctions held in 2022 and 2024.