Vodafone Idea spurts on buzz Cabinet approves BG waiver for telecos

Vodafone Idea spurts 17.34% to Rs 8.19 after the Union Cabinet reportedly approved the waiver of bank guarantees (BGs) for spectrum purchased before 2022.

This move provides significant relief to telecom operators burdened by significant BG obligations, particularly Vodafone Idea, which owes over Rs 24,700 crore in BGs. Indian telecom operators, including Airtel and Vodafone Idea, collectively hold more than Rs 30,000 crore in bank guarantee obligations.

The government's decision aims to alleviate financial pressures and strengthen the telecom sector. By extending the BG waiver to older spectrum holdings, the government hopes to improve the financial health of struggling telecom operators.

Vodafone Idea, which has been vocal about its financial challenges, had urged the government to eliminate the BG requirement to ease its spectrum payment burden. The company argued that such a waiver would enable it to secure additional credit from banks, providing crucial financial support.

However, the company recently faced setbacks in meeting its BG obligations. It failed to pay a second BG of about Rs 350 crore due on November 1, following a missed payment of over Rs 4,600 crore in September.

To address its financial woes, VIL has raised Rs 24,000 crore through equity and is seeking an additional Rs 25,000 crore in loans and Rs 10,000 crore in BGs or letters of credit. These funds are crucial for the company to continue its capital expenditure and compete with rivals Airtel and Jio.

Vodafone Idea is an Aditya Birla Group and Vodafone Group partnership. It is amongst India's leading telecom service provider. The company provides pan India voice and data services across 2G, 3G and 4G platforms. The company holds large spectrum portfolio including mid band 5G spectrum in 17 circles and mmWave 5G spectrum in 16 circles.

The telecom service provider's consolidated net loss narrowed to Rs 7,175.9 crore in Q2 FY25 compared with net loss of Rs 8,737.9 crore in Q2 FY24. Revenue from operations rose 2.01% year on year (YoY) to Rs 10,932.2 crore in Q2 September 2024.

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