Bank Guarantee Waiver Likely For Telcos for 2022 Spectrum Sale
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Govt May Give Relief to Telcos On Bank Guarantee
By Sanjay Singh
New Delhi, October 6: The government is considering a proposal to waive off bank guarantees of telecom companies who had got spectrum in 2022. The move is likely to come as a booster for telcom operators.
Telecom companies like Vodafone Idea, which is India’s third largest telecom operator, could be the biggest beneficiary, if the Union Telecommunications Ministry decides to approve the proposal, according to government sources.
Before 2022, telecom operators were required to submit a bank guarantee to buy spectrum and the rule ensured regular annual payments against spectrum sale.
Earlier in June the debt-ridden telco had reached out to the telecom department to seek waiver on a financial bank guarantee of Rs 24,747 crore for spectrum payment due in September 2025.
The financial bank guarantee needs to be deposited one year before the due date as per spectrum auction rules.
The payments are for frequencies that Vodafone India purchased in auctions that were conducted before 2022. Vodafone India in 2022 opted for a four-year moratorium to pay for the spectrum allowed under a government relief package.
The company also opted for a moratorium on Annual Gross Revenue payments. It ends in March 2026. Providing a blow to the telcos, the Supreme Court on September 19 rejected pleas to re-compute adjusted gross revenue dues.
In May this year, telecom operators had sought 5-6 years moratorium on spectrum purchases after 2025. Telcos said such a moratorium is needed on spectrum bought in auctions from next year due to significant capital expenditure incurred in deploying 5G services.
The newly identified frequency bands, totaling 4,000 MHz, are expected to be included in upcoming auctions next year. Spectrum is typically leased to operators for a 20-year term, implying that the operators will pay over a 14-15 years period through equal annual installments.
In their communication to the Telecom Regulatory Authority of India (Trai), telecom companies said such a moratorium is needed on spectrum bought in auctions from next year. They cited significant capital expenditure incurred in deploying 5G services, which have yet to generate revenue. They also emphasised the ongoing need for further investment in their networks.
Additionally, operators have asked for the introduction of a new payment method alongside the two existing options for spectrum acquired through auctions.
Currently, one payment option involves an initial upfront payment equivalent to at least two years’ worth of spectrum installments, with the remaining balance paid in equal installments along with applicable interest over the 20-years spectrum holding period.
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