The Centre has sent letters waiving the need for bank guarantees worth about Rs 33,000 crore for past spectrum auctions to all three private operators — Reliance Jio, Bharti-Airtel, and Vodafone-Idea (Vi). The bulk of the relief, amounting to Rs 24,800 crore, applies to Vi, a relative straggler.Vi, which is yet to roll out 5G services, now no longer needs to submit these bank guarantees, and the Centre’s decision now opens the space for lenders to extend much-needed credit to the struggling telco. It urgently needs funding to ramp up 4G coverage and roll out 5G soon to catch up with bigger rivals Jio and airtel.The loss-making telco had previously said lenders were not willing to furnish the additional guarantees, given its financial stress.“The letters to the telcos were sent on December 27,” an official privy to the details told ET.The BG waiver will apply to spectrum auctions conducted in 2012, 2014, 2015, 2016, and 2021. Spectrum auctions conducted in 2022 and 2024 have already done away with the requirement for BGs based on the 2021 telecom reforms package.Telcos were otherwise required to furnish the guarantees to the Department of Telecommunications (DoT) to cover for spectrum payments in past auctions. 116749617Vi in Talks with DoTAirtel was scheduled to submit Rs 2,500-3,000 crore in BGs next year while the amount for Reliance Jio was about Rs 3,500-4,000 crore, as per DoT calculations. But since then, Airtel has cleared some more spectrum payments for previous auctions, thus reducing the amount needed toward BGs.Queries sent to Reliance Jio and Bharti Airtel remained unanswered until the publication of this report. Vi, though, confirmed receiving the letter from DoT concerning the BG waiver.Vi said as per its understanding of the terms and conditions, out of all the five auctions mentioned above, no BGs will be required to be provided by it for the 2012, 2014, 2016 and 2021 auctions.“However, there would be a one-time partial shortfall only for the 2015 auction, where the NPV of all payments made would be less than the pro-rated value of spectrum used. We are in discussion with the DoT to determine the final amount of this partial shortfall for the 2015 auction,” Vi said in a regulatory filing late Saturday.Shares of Vi, which closed at Rs 7.49 apiece Friday on the National Stock Exchange, have lost 56% in the year to date.As per current provisions, for spectrum auctions conducted before 2022, a telco needed to submit a BG of an amount equal to the next instalment 13 months in advance to securitise the spectrum payments. But the Cabinet had decided to waive this condition last month, following which the DoT has issued the letters to the telcos.This move will allow telcos to pay their annual instalments on the designated date without submitting any BGs 13 months in advance.As per the provisions of the BG waiver, while telcos need not submit any BGs, any shortfall in payments must be securitised. And, that will be calculated on a pro-rated basis from the date of allocation of spectrum.Cash CallVi, the biggest beneficiary of the move, has already raised Rs 24,000 crore via equity. It now wants to raise a further Rs 25,000 crore via loans and another Rs 10,000 crore in BGs or letters of credit to continue its capital expenditure plans for competing effectively with Airtel and Jio.The DoT now believes the BG waiver will ease financial burden on telcos in general and Vi in particular, allowing companies to continue operations, and will also enable the recovery of adjusted gross revenue dues and deferred revenue from spectrum auctions.The government is now the single largest shareholder of the JV between UK’s Vodafone Group and India’s Aditya Birla Group (ABG) with a 23.15% stake.Vodafone and ABG own 22.56% and 14.76% stakes in Vi, respectively.“In case any telco goes bust, the government is set to be a major loser, with a cascading impact on the banking sector and the overall economy,” an official had told ET earlier.
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