DoT may return Telcos' ₹23kcr bank guarantees

The Department of Telecommunications (DoT) is preparing a Cabinet note that will propose returning to telcos bank guarantees (BGs) worth almost ₹23,000 crore kept in connection with their outstanding adjusted gross revenue (AGR) dues.

A senior government official told ET that the Cabinet note is likely to also fix October 24, 2019, as the date up to which DoT will compute the AGR dues of the telcos.

If these developments take place, Vodafone Idea (Vi) will be the biggest beneficiary.


Of the total amount of bank guarantees (BG) proposed to be refunded, Vi will likely get about ₹15,000 crore, while Bharti Airtel has guarantees between ₹7,000 crore and ₹8,000 crore with the government, the official told ET.

Move to Boost Vi's Fundraising Plans
"The note is under consideration and will be floated to various ministries soon and this could come up in the Cabinet by the end of the month or early April," the official said.

As reported by ET in its March 2 edition, Vi had sought release of BGs worth around Rs 15,000 crore, and freezing of the AGR dues on October 24, the day of the Supreme Court judgment. The telco had told DoT that potential external investors were seeking clarifications on both these points as the loss-making service provider races to raise funds by the self-mandated March-end deadline.

"The guarantees could be returned...but to protect government revenue, 20% of the total dues could be submitted to the DoT a year before the AGR payments fall due," the official said. The BGs are security deposits against the AGR dues carriers owe to the government.

Return of BGs will add to the lending banks' capital pool, allowing a loss-making telco such as Vi to tap more loans as it seeks to invest in its 4G network to better compete with stronger rivals Reliance Jio and Bharti Airtel and stem subscriber losses. It also needs capital to participate meaningfully in the upcoming 5G spectrum auctions.

Relief Package

The telecom relief package announced last September allows the companies to pay the principal amount to the government only after four years. "Hence, the guarantees could be submitted in the third year," the official said.

Also, the relief package reduced the burden of the guarantees, slashing the amount required to 20% of statutory dues against which they are sought.

The official added that the reason for freezing the date of the AGR computation is to help calculate the value of equity in cases where the government needs to convert the interest accrued due to the deferred AGR dues, or even the actual principal, into equity.

As per the relief package, telcos have been given the option of deferring their AGR and spectrum dues by four years. They can also opt to convert the interest that accrues due to the deferral into government equity.