DoT demands Rs 6,090 crore bank guarantee from Vodafone Idea

Vodafone Idea chief executive officer (CEO) Akshaya Moondra on February 12 told analysts during the Q3 earnings call that the telco was in discussions with the DoT.

Vodafone Idea said that among the five auctions mentioned, no bank guarantees would be required for the 2012, 2014, 2016, and 2021 auctions. However, a one-time partial shortfall remains for the 2015 auction, where the NPV of all payments made is less than the pro-rated value of the spectrum used.

As per the telecom reform package of 2021, no bank guarantee (BG) was required for spectrum auctions held after the reforms, as the industry was considered mature and the past requirement for BGs was no longer necessary.

In December last year, the DoT further supported the telecom industry by waiving the bank guarantee requirement for spectrum auctions held prior to the reforms—specifically for auctions in 2012, 2014, 2015, 2016, and 2021—provided that the pro-rated value of spectrum used, from the date of allocation to three months after the due date of the next instalment, is less than the net present value (NPV) of payments made by the telecom operator.

Before this reform, Vodafone Idea was required to provide bank guarantees amounting to approximately Rs 24,800 crore against each spectrum instalment 13 months before the due date of payment for the above auctions.

Kapania, in the statement, said the instalments related to spectrum and AGR instalment, subject to final determination, falling due during FY 2026 on which moratorium was availed, including the 2015 Spectrum auction shortfall aggregating to Rs. 327,235 Mn.

"In case of cash shortfall, if any, on account of the above payments. The Company, based on the Telecom Reforms Package of September 2021, expects such shortfall to be converted into equity," he added.

With the capital infusion so far, Vodafone Idea will be able to conclude the negotiations with lenders and vendors. "...and with continued support from DoT, including conversion of spectrum and AGR instalments post moratorium into equity, if required, in line with the Telecom Reforms Package of September 2021 and generation of cash flow from operations that will enable it to settle its liabilities as they fall due," Kapania said.