Vodafone Idea misses Rs 350-crore bank guarantee payment; may not face penal action

New Delhi: Vodafone Idea (Vi) missed paying its second bank guarantee (BG) of about '350 crore to cover for spectrum bought in a 2012 auction and which was due November 1, said officials familiar with the matter. This follows India's third-largest telecom operator missing payment of more than '4,600 crore BG this September for a 2016 spectrum auction.

The Department of Telecommunications (DoT) is, however, unlikely to invoke any penal action against the struggling telco till a decision is taken on a DoT proposal to waive BG for spectrum auctions.

"The draft Cabinet note on the waiver has been prepared and circulated and it will be sent for approval soon," an official told ET. A second official said the law ministry and the finance ministry are yet to reply on the note but still it might be sent to the Cabinet to take a final call on the matter.

The next BG for Vi will become due in February. The company is required to submit a total of about '24,700 crore in BGs in the coming months for past auctions.

"The 2021 reforms package did away with the requirement to provide bank guarantees for spectrum acquired in future auctions. The industry through COAI has sought removal of bank guarantees requirements for spectrum acquired prior to 2022. We understand that this industry ask is being considered by the government," a Vi spokesperson said in reply to ET's query on the BG payments.

Vi initially sought the BG waiver, which was supported by other telcos. However, any positive decision by the government on the issue will primarily benefit Vi. While rivals Bharti Airtel and Reliance Jio too need to submit BGs for securing past auction payments, their amounts are much lower than Vi.

For instance, Airtel's BG for 2016 auction is due in September next year but the company only needs to pay about '2,200 crore. Jio's BG of about '4,400 crore is due after Airtel.

Vi had cited its financial troubles to seek the waiver-a move which, it expects would give banks more headroom for extending credit to the company.

ET earlier reported that DoT had floated a draft cabinet note regarding the BG waiver provisions, which states that a waiver can only be considered if the telco agrees to pay an additional three months' amount along with annual payment. If the draft gets cabinet approval, there won't be any requirement for BGs, but the telcos will have to pay instalments covering payments for 15 months, with instalments for three extra months acting as a security for the next year's payments.

Vi recently raised '24,000 crore via equity. It now wants to raise a further '25,000 crore via loans and another '10,000 crore in BGs or letters of credit to continue its capital expenditure plans for competing effectively with Airtel and Jio. But banks are cautious due to the telco's stressed finances and have been seeking more corporate guarantees to extend any credit.

The issue around submission of BGs came up as the DoT in late 2021 returned all the BGs as no instalment was due for 35 months. The September 2021 telecom reforms allowed telcos to avail a four-year moratorium for spectrum and adjusted gross revenue (AGR) dues.