Vodafone Idea, Airtel get a breather as government returns ₹22,000 crore worth of bank guarantees

• The Department of Telecommunications (DoT) has returned over ₹22,000 crore worth bank guarantees to Vodafone Idea and Airtel.
• This comes as a relief especially to Vodafone Idea, which had given INR 15,000 crore worth guarantees, more than twice that of Airtel.
• The company had requested the DoT to return its bank guarantees after accepting the AGR and spectrum dues moratorium.

In a major relief to Vodafone Idea and Bharti Airtel, the Department of Telecommunications (DoT) has revealed that it has released the bank guarantees that were held by it.

According to a report by the Economic Times, the DoT has filed an affidavit in the Supreme Court informing it that it has returned the bank guarantees to Vodafone Idea and Airtel.

Last month, Vodafone Idea had requested the DoT to release its bank guarantees as the board of directors of the telco were set to meet to discuss fundraising plans.

Vodafone Idea had argued that as the adjusted gross revenue (AGR) and spectrum dues have been deferred by four years, and the government has the option to convert this into equity, there is no need to hold up the bank guarantees for the same dues.

The DoT has now confirmed that it has released bank guarantees worth ₹15,000 crore to Vodafone Idea and ₹7,000 crore to Airtel. The telcos have reportedly been asked to re-furnish bank guarantees of an amount equal to their next installment 13 months before the due date.

“Pursuant to the Cabinet decision and in view of the fact that VIL and BAL had opted for such moratorium on spectrum auction installments and no installment is due necessitating security in the form of financial bank guarantees till 13 months before the next payable installment post moratorium period, DoT has returned the existing bank guarantees,” the DoT said in its affidavit, according to the report.

The telecom department has added that the government will help ensure funds for the “telcos to reinvest in capex heavy telecom networks and lead to growth in the sector and eventually to employment.”

The return of these bank guarantees will add to the lending bank’s capital pool, helping the cash-strapped telco raise more funds as it looks to improve its network capacity and infrastructure.

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