Telecom major Airtel has called for an even playing field as the Department of Telecommunications (DoT) deliberates on Vodafone Idea‘s (Vi) appeal to waive off bank guarantees.
What Happened: Airtel has expressed apprehension over the possible waiver of bank guarantees for Vi, according to a report by The Economic Times.
While the telecom firm has expressed its support for the proposed waiver, it has also emphasised that any regulatory reforms should be based on a “non-discriminatory” framework that applies equally to all telecom operators, without taking into account factors like the financial health of specific companies. This comes as the DoT mulls Vi’s request to reduce its crippling debt burden.
Vodafone Idea has highlighted its financial difficulties while requesting government assistance to waive the requirement for bank guarantees (BGs) to secure spectrum payments. The company believes this move would provide banks with more flexibility to extend credit to the financially distressed telecom operator.
In its letter, Airtel noted that it had also acquired spectrum worth thousands of crores and would be required to submit BGs in the coming months for airwaves purchased in auctions held before 2021, according to officials.
Earlier, the DoT was reportedly mulling over the idea of waiving bank guarantees for deferred spectrum instalments on the condition that telecom firms pay an additional three months' instalment annually.
While Vodafone Idea will be the primary beneficiary of the waiver as its BG amount is the highest among all players, rivals like Bharti Airtel and Reliance Jio could also benefit from it as the government policy typically applies to all.
Cash-strapped Vodafone Idea is required to submit bank guarantees totalling around ₹24,700 crore to the government in the coming months. Jio’s annual bank guarantee requirement for past spectrum auctions is estimated to be around ₹4,000 crore, while Airtel’s could be about ₹3,000 crore, the report said. Both companies have been pre-paying instalments on past spectrum dues to reduce interest costs.
The telecom industry in India is fiercely competitive, with companies constantly vying for market share. The telecom industry is keenly awaiting the DoT’s decision on Vi’s plea as it could establish a benchmark for similar cases in the future.
In October, the DoT had reportedly asked Vodafone to submit a revival plan for the next four to five years before it approved the bank guarantee exemption.
Price Action: Airtel’s shares were down 1.32% to ₹1,570.20 whereas Vodafone Idea was trading 2.41% higher at ₹8.07 on Tuesday morning.
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