Bank guarantee waiver will ease telcos' financial burden, says COAI

The move come as a relief to Vodafone Idea, which owes the government over Rs 24,700 crore in bank guarantees

The Cellular Operators Association of India (COAI) on November 26 welcomed the cabinet’s move to waive the bank guarantee requirement for spectrum purchased before 2022, saying it would significantly alleviate the financial strain on telecom operators.

The cabinet on November 25 cleared a proposal to waive bank guarantee for telecom operators on spectrum purchased before 2022, sources said. Indian telecom operators, including Airtel and Vodafone Idea, collectively owe more than Rs 30,000 crore in bank guarantees to the government.

“This landmark decision will greatly reduce the financial burden on telecom operators in the country. While we are still reviewing the details, we are optimistic that this step will enhance cash flow, free up capital, and support capital investments,” COAI director general said SP Kochhar said in a statement.

The COAI, which represents Reliance Jio, Bharti Airtel and Vodafone Idea, said the decision would improve cash flow, free up capital, and facilitate investments in network expansion and technological upgrades.

COAI had in August urged telecom secretary Neeraj Mittal to scrap the bank guarantee requirements for spectrum acquired before 2022, arguing that the requirements for older spectrum should align with reforms that removed the requirement for future purchases.

The cabinet decision brings relief to companies such as Vodafone Idea, which owes over Rs 24,700 crore in bank guarantees, sources said.

The cabinet’s decision builds on the 2021 telecom reforms, which eliminated guarantee requirements for spectrum acquired in auctions from 2022 on.

Previously, operators were required to furnish bank guarantees to secure deferred payments for spectrum bought before 2022, ensuring compliance with annual payment obligations.

Vodafone Idea, facing severe financial challenges, repeatedly called for the removal of the requirement to ease its payment obligations.

The company argued that the waiver would unlock additional credit from banks, offering crucial financial support.

Vodafone Idea recently raised Rs 24,000 crore through equity and is now seeking to raise an additional Rs 25,000 crore in loans and another Rs 10,000 crore in bank guarantees or letters of credit.

This funding is essential for continuing its capital expenditure plans to compete with Airtel and Jio.

(Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.)