Bank Guarantee Waiver Set To Boost 4G And 5G Investments In India, Says Vodafone Idea

India's bank guarantee relief to the telecom industry will boost 4G and 5G investments in India, according to private telecom operator Vodafone Idea Ltd.

This waiver is a clear indication of the government’s continued support to the telecom industry, Vodafone Idea said in a statement on Dec. 28. "It will ensure that the exposure of the banking system is utilized by telecom operators towards further proliferation of 4G and 5G networks in India."

India waived bank guarantee obligation for the spectrums acquired before 2022, in a much-needed relief to the company and the industry. The cabinet waived off bank guarantee for telecom companies for deferred spectrum payments from 2012 onwards.

Prior to this reform, bank guarantees aggregating to Rs 24,800 crore were required to be provided by Vodafone Idea against each spectrum instalment, 13 months prior to the instalment falling due for the above auctions. Other major players including Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd. also expected to gain from the decision.

Post the waiver announcement, no bank guarantees will be required to be provided by the operator for the 2012, 2014, 2016 and 2021 auctions, Vodafone Idea said in a statement.

However, there would be a one-time partial shortfall only for the 2015 auction, where the net present value of all payments made would be less than the pro-rated value of the spectrum used, it said. "We are in discussion with the DoT to determine the final amount of this partial shortfall for the 2015 auction."

The moratorium for spectrum auction dues for Vi is ending in October next year and BGs were supposed to be submitted 13 months before the next due payment.

Vi was expected to submit BGs in tranches for different spectrum auctions pre-2022. However, the company did not submit any of the tranches scheduled for September and in the ongoing month.

Vodafone Idea is currently on a fundraising spree via various instruments to continue its capex plans.