Airtel pushes DoT for non-discriminatory waiver in telecom sector reforms

Airtel has urged the Department of Telecommunications to ensure that the proposed waiver on spectrum bank guarantees applies uniformly across all telecom operators, regardless of financial health

As the government considers Vodafone Idea’s plea for a waiver of bank guarantees associated with spectrum payments, Bharti Airtel has urged the Department of Telecommunications (DoT) to ensure equal treatment for all telecom companies, regardless of their financial status, according to a report by The Economic Times.

 

In a recent letter to the DoT, Airtel expressed its support for the proposed waiver but emphasised that any regulatory changes must adhere to a ‘non-discriminatory’ approach applicable to all operators.

Vodafone Idea’s financial challenges

Vodafone Idea has highlighted its ongoing financial difficulties as it seeks government assistance to eliminate the requirement for bank guarantees (BGs) to secure its spectrum payments. The company believes that such a waiver would enable banks to extend more credit to them, thereby providing some financial relief.

   

Airtel, in its letter, stated that it too had invested significantly in spectrum acquisitions, requiring BG submissions in the near future for airwaves obtained in auctions before 2021. The letter referenced the 2021 telecom reforms, which aimed to treat all telecom operators equitably without favouring any specific company.

Previous appeals by industry associations

In August, the Cellular Operators Association of India (COAI), representing private telecom companies, also reached out to the DoT, advocating for the elimination of BG requirements for auctions held before 2022.

 

It was earlier reported that the DoT is considering a draft cabinet note regarding BG waivers. According to the proposed provisions, a waiver may be granted only if the telco agrees to pay an additional three months’ payment alongside its annual fee. If the cabinet approves this draft, telecom companies would be exempt from BG requirements but would need to fulfill payments for a total of 15 months, with the extra three months serving as a security deposit for future payments, the report mentioned.

 

Although the waiver is primarily designed to assist Vodafone Idea, competitors such as Bharti Airtel and Reliance Jio could also benefit, as government policies typically extend to all operators. Vodafone Idea would stand to gain the most, given that it faces the highest BG obligations among the telecom players.

Financial obligations of Vodafone Idea

Currently, Vodafone Idea is expected to submit BGs totalling approximately Rs 24,700 crore. In comparison, Reliance Jio’s annual BG requirement from previous auctions is estimated at around Rs 4,000 crore, while Airtel’s is about Rs 3,000 crore. Both Jio and Airtel have been prepaying installments on past spectrum dues to minimise interest costs.

Vodafone Idea’s funding needs

Following its successful raise of Rs 24,000 crore through equity, Vodafone Idea aims to secure an additional Rs 25,000 crore in loans and Rs 10,000 crore in BGs or letters of credit to support ongoing capital expenditures, allowing it to compete more effectively with Airtel and Jio. However, banks have been hesitant to extend credit due to the telco’s precarious financial situation, demanding more corporate guarantees, the report said.

 

The discussion surrounding BG submissions emerged after the DoT returned all BGs in late 2021, as no installments were due for 35 months. The September 2021 telecom reforms provided telcos with a four-year moratorium on spectrum payments and adjusted gross revenue dues.

 

Under the DoT’s proposal, the waiver terms would apply to spectrum auctions conducted in 2012, 2014, 2015, 2016, and 2021, contingent upon the companies accepting the outlined terms and conditions for the waiver provisions, the report said.