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Vodafone Idea Ltd (VIL) is attracting attention following a communication from the Department of Telecommunications (DoT) concerning the waiver of bank guarantees. Additionally, the promoter entity, Vodafone Group, has resolved Rs 11,650 crore related to its outstanding dues that are secured against its shares in the domestic telecom operator.
The Department of Telecommunications (DoT) has eliminated the necessity for Bank Guarantees (BGs) concerning spectrum auctions that took place before the 2021 telecom reforms, providing significant relief to the telecom sector, particularly Vodafone Idea (Vi).
Monday morning's attention remained on Vodafone Idea Ltd. (VIL) shares, which have already dropped 56% in 2024. On Friday, VIL's stock closed at Rs 7.49, down 0.93 percent.
"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 stated in an exchange filing.
According to Vodafone Idea's interpretation of the terms and conditions, VIL will not be required to provide bank guarantees (BGs) for the 2012, 2014, 2016, and 2021 auctions out of the five auctions. Prior to the recent reform, VIL was required to provide bank guarantees totalling Rs 24,800 Crore against each spectrum instalment, 13 months before the installment was due for the auctions.
However, for the 2015 auction, VIL stated that there would be a one-time partial shortfall, meaning that the prorated value of the spectrum used would exceed the net present value of all payments made. To ascertain the precise amount of this partial shortfall for the 2015 auction, the telecom provider is currently in talks with the DoT.
The waiver is applicable in cases where the prorated value of spectrum usage up to three months after the next instalment due date is less than the Net Present Value (NPV) payments made by telecom operators.
A step towards telecom investment boost
Vodafone Idea praised the government's action in a statement released on Saturday, December 28, stating that "Government's BG relief to telecom industry will boost 4G and 5G investments in India." Vi added, "The government's sustained support for the telecom sector is evident in this BG waiver measure. It would guarantee that telecom operators use the banking system's exposure to further expand 4G and 5G networks in India"