DoT likely to issue notice to Vodafone Idea for missing date to submit Rs 6,091 crore bank guarantee

Vodafone Idea

The Department of Telecommunications (DoT) is expected to issue a formal notice to Vodafone Idea after the company missed the deadline to submit a bank guarantee of Rs 6,091 crore to cover the shortfall in its 2015 spectrum auction dues, sources told Moneycontrol.

An official said that the department will act according to the terms and conditions of the licence and spectrum allocation.

The telecom department (DoT) had directed the struggling telecom operator to either furnish the guarantee or make a cash payment of Rs 5,493 crore by March 10; the telco said in a BSE filing earlier this month. This bank guarantee is meant to cover a one-time payment shortfall for spectrum acquired after 2015.

This development follows DoT’s decision to waive Rs 24,800 crore in bank guarantees for spectrum auctions held in 2012, 2014, 2016, and 2021. However, the waiver did not extend to the 2015 auction, and Vodafone Idea had requested DoT to include it in the relief.

Sources told Moneycontrol that Vodafone Idea is in discussions with the telecom department, seeking a resolution as it lacks the funds to meet either requirement.

A query sent to Vodafone Idea did not receive a response.

Vodafone Idea chief executive officer (CEO) Akshaya Moondra told analysts during the Q3 earnings call on February 12 that the telco was discussing the bank guarantee with the DoT. He then said the company regularly engaged with the government on equity conversion for deferred and non-deferred instalments.

Under current regulations, failing to provide the necessary bank guarantee can lead to the government seizing the spectrum. This guarantee provides financial protection if a telecom operator defaults on its spectrum payment responsibilities.

The telecom reforms introduced in 2021 abolished the requirement for bank guarantees in future spectrum auctions. In the past, operators like Bharti Airtel and Vodafone Idea were obligated to submit these guarantees well in advance, typically 13 months before the auction.

Recently, the Department of Telecommunications (DoT) eased this rule for spectrum acquired in the years 2012, 2014, 2015, 2016, and 2021, with one crucial condition: the total payments made by the operator, based on net present value, must exceed the pro-rated value of the spectrum in use. Vodafone Idea meets this criterion for most auctions but falls short for the 2015 auction.

Although Vodafone Idea holds Rs 12,090 crore in cash and bank balances, it has committed these funds to ongoing capital expenditures, mainly for network expansion.

As of December 31, 2024, the company’s total liabilities to the government amounted to Rs 2.27 lakh crore, which includes deferred spectrum payments due until FY44, AGR dues, and accrued interest payable by FY31. The AGR liability alone stands at Rs 77,000 crore.

The four-year moratorium on AGR and spectrum payments, provided under the 2021 telecom relief package, will end in FY26.

Vodafone Idea is currently in the process of launching its 5G commercially, starting with Mumbai this month. It has begun trial runs of its 5G network in the city, aiming for a full commercial launch around Holi on March 14. After Mumbai, the operator plans to roll out 5G in Delhi, Bengaluru, Chandigarh, and Patna by April.