May boost 4G, 5G investment: VIL calls DoT's bank guarantee waiver 'relief'

Prior to this reform, bank guarantees aggregating to about Rs 24,800 crore were required to be provided by VIL against each spectrum instalment, 13 months prior to the installment falling

Don't want to miss the best from Business Standard?

The telecom department has waived the requirement of bank guarantee to be submitted for spectrum auctions held prior to the reform package, telecom operator Vodafone Idea said on Saturday, adding that the latest "relief" will boost 4G and 5G investments in India.

Prior to this reform, bank guarantees aggregating to about Rs 24,800 crore were required to be provided by VIL against each spectrum instalment, 13 months prior to the instalment falling due for the above auctions, the company said in a BSE filing.

"As per our understanding of the terms and conditions, out of all the 5 auctions mentioned above, no BGs (bank guarantee) will be required to be provided by VIL for the 2012, 2014, 2016 and 2021 auctions," the telco said.

There would, however, be a one-time partial shortfall, only for the 2015 auction, where the net present value or NPV of all payments made would be less than the pro-rated value of spectrum used, VIL said and informed that it is "in discussion with the DoT to determine the final amount of this partial shortfall for the 2015 auction".

"This step of BG waiver is a clear indication of the government's continued support to the telecom industry. It will ensure that the exposure of the banking system is utilised by telecom operators towards further proliferation of 4G and 5G networks in India," the VIL filing said.

As per the telecom reform package of 2021, no bank guarantee was required to be provided for the spectrum auction held post reform package.

The Department of Telecom (DoT) in a communication dated December 27, 2024, has dispensed with the requirement of submission of Financial Bank Guarantees for the spectrum acquired in auction held in 2012, 2014, 2015, 2016 and 2021, subject to certain terms and conditions.

"Recently, the Department of Telecommunication, Government of India further extended its support to the telecom industry by dispensing with the requirement of Bank Guarantee to be submitted for spectrum auctions held prior to reform package that is for spectrum auctions of 2012, 2014, 2015, 2016 and 2021, provided the pro-rated value of spectrum used from the date of allocation till the end of three (3) months after the due date of payment of next instalment is less than the value of payment made by the telecom operator on an NPV basis," VIL said.