Following requests from Cash-ridden Vodafone-Idea (VI) for a Bank guarantee waiver for the securitization of the deferred spectrum installments, DoT has prepared a cabinet note in the same regard.  

Why is the Bank Guarantee Required? 

The telco had requested the government last week to consider a waiver in the Bank Guarantee requirement for the spectrum acquired before 2022 with detailed representations. The bank guarantee stands as a security against the dues of Spectrum allocated until 2022. 

What's the catch in the offer? 

As per the cabinet note, there won’t be the requirement for any BGs while the telcos will have to pay for 3 months in advance as a security for next year’s payment. The waiver would apply only to spectrums allocated in 2012, 2014, 2015, 2016, and 2021 subject to terms and conditions. 

When does the Previous Moratorium End?  

As VI approaches the moratorium for spectrum auction dues in October 2025 the BGs will have to be submitted 13 months before in September 2023. As the telco failed to submit a BG of Rs 4300 crore, DoT issued a notice.  

Ongoing Consultations 

The DoT has already shared the cabinet note with the finance and law ministry for tier comments on the same. Once the consultations, the draft cabinet note will be advanced to the cabinet for its approval. The idea was initially rejected as the condition of bank guarantee was entailed in the Notice Inviting Applications (NIA), which is sort of binding on both parties.   

Benefits for Airtel & Jio

If the cabinet greenlights the proposal for a loan waiver, it would reap good benefits for Reliance Jio and Bharti Airtel too as the former has to commit around Rs 4,000 Crore while the latter will have to commit around Rs 3000 Crore. 

Future Prospects 

With the DoT considering waiving off the requirement of BG, the journey forward for the telcos can be considered smoother with them focusing on other important aspects of the business and not worrying about some rules here and there.