After the government’s approval of a significant bank guarantee waiver for spectrum payments provided a lifeline to Vodafone Idea, global brokerage firm Citi assigned the debt-laden telecom operator a "buy" rating with a target price of Rs 13 per share, indicating a potential 70% upside from current levels.The government’s decision to waive the requirement for bank guarantees on spectrum acquired in auctions from 2012 to 2021 has provided a crucial boost to Vodafone Idea, easing the financial pressure on the struggling telecom giant, Citi noted.Prior to this move, Vodafone Idea was required to submit bank guarantees worth nearly Rs 24,800 crore for spectrum dues, a burden that had hindered its ability to secure debt funding.Citi noted that this waiver addresses a critical roadblock for Vodafone Idea, paving the way for improved funding prospects. The waiver also benefits Indus Towers, where Citi has maintained a "positive catalyst watch." The brokerage highlighted Indus Towers’ over 6% dividend yield as an undervalued aspect of its appeal, now bolstered by improved visibility on payments from Vodafone Idea.According to the Department of Telecommunications (DoT), the waiver applies to spectrum auctions held in 2012, 2014, 2016, and 2021, subject to specific conditions. However, Vodafone Idea still faces a one-time shortfall related to the 2015 auction, for which discussions are ongoing to determine the final amount."This step of bank guarantee waiver is a clear indication of the government's continued support to the telecom industry and will ensure the exposure of the banking system is utilised by telecom operators towards further proliferation of 4G and 5G networks in India," Vodafone Idea said in an exchange filing.Shares of Vodafone Idea rose 3.75% on Monday following the news but the stock is down nearly 55% over the past year. On Tuesday, Vodafone Idea shares were trading 1.3% lower in tandem with broader market moves. Citi cautioned that while the bank guarantee waiver is a major relief, progress on Vodafone Idea's debt funding remains a key factor to watch, with broader implications for the company and Indus Towers alike.Also read | ICICI Securities downgrades Star Cement on M&A overhang(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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