Telecom companies will get big relief from exemption in bank guarantee, burden will reduce- COAI
Cellular Operators Association of India (COAI) has welcomed the cabinet’s decision to waive the requirement of bank guarantee for spectrum purchased before 2022. COAI said that this move of the cabinet will significantly reduce the financial pressure on telecom companies. According to sources, the cabinet has approved the proposal to waive bank guarantee for telecom operators on spectrum purchased before the year 2022. Indian telecom operators including Airtel and Vodafone Idea owe more than Rs 30,000 crore to the government as bank guarantee. COAI Director General SP Kochhar said in a statement that this decision will significantly reduce the financial burden on telecom companies. However, he also said that we are still reviewing, but it is expected that this step will increase cash flow, make capital available and help investment.
COAI represents Reliance Jio, Bharti Airtel and Vodafone Idea etc. The association said that this move will also help the companies to expand their network and upgrade the technology. Earlier in August this year, the association had urged Telecom Secretary Neeraj Mittal to eliminate the requirement of bank guarantee for spectrum purchased before 2022, the association argued that this condition for old spectrum should be done in the direction of reforms in which these conditions were removed for future purchases.
According to sources, this decision of the Cabinet will provide relief to companies like Vodafone Idea, which owe more than Rs 24,700 crore in the form of bank guarantee.
This decision of the Cabinet is based on the reforms of the telecom sector of 2021, which eliminated the requirement of guarantee for spectrum purchased in auction from 2022. Earlier, operators had to submit bank guarantee to secure further payments for spectrum purchased before 2022 so that the terms related to payment could be met on time.
Vodafone Idea, which is facing serious financial challenges, was constantly demanding this relief. The company argued that with this exemption, the company would get additional loan from banks, which would provide important financial help to the company. Vodafone Idea has recently raised Rs 24,000 crore through equity and now it plans to raise Rs 25,000 crore through debt and Rs 10,000 crore through bank guarantee or letter of credit. This funding is necessary for the company to remain in competition with Airtel and Jio. In Tuesday’s trading, Vodafone Idea’s stock closed at 7.47 with a gain of more than 7 percent.
