Vodafone Idea Ltd shares jumped over 15% to Rs8.28 Tuesday morning amidst reports that the Union Cabinet approved the waiver to submit bank guarantees for spectrum purchased through auctions held before 2022. Responding to BSE, Vodafone Idea clarified that it has not yet received any communication from the department of telecom (DoT) or the government of India about any decision taken nor is there any press release available on their website.
According to reports, the waiver will provide a huge relief to the debt-ridden Vodafone Idea. The telco has already crossed its deadlines to submit a bank guarantee of Rs24,746.90 crore for spectrum payment between October 2025 and September 2026.
"Vodafone Idea recently defaulted on its second bank guarantee payment of approximately Rs350 crore, due on 1st November, for spectrum acquired in a 2012 auction. This follows an earlier missed payment of over Rs4,600 crore for a bank guarantee related to a 2016 spectrum auction in September," says
a report from Moneycontrol.
As part of telecom reforms announced in September 2021, the Indian government had already waived the requirement of depositing bank guarantees for spectrum purchased through auctions.
Telcos, including Vodafone Idea and Bharti Airtel Ltd, have been urging the Union government to waive bank guarantees. Even the Cellular Operators Association of India (COAI) has been urging the government to revoke bank guarantee requirements for telecom operators on spectrum purchased before 2022.
Vodafone Idea has seen a sharp drop since the adjusted gross revenue
(AGR) judgement, though the bulk of the decline was due to the rejection of relief by the Supreme Court. Moreover, the delayed debt-raise sustains uncertainty around the pace and quantum of the VodaIdea overall network expansion, which has a direct bearing on market share.
In October 2019, the apex court had ruled in favour of the department of telecom (DoT) with regard to AGR, thereby resulting in around Rs92,000 crore burden on telecom companies.
The review petitions filed by them against the October 2019 judgment were dismissed by the apex court in January 2020.
The total liability on Vodafone Idea is Rs58,254 crore, while Bharti Airtel has to pay Rs43,980 crore.
Vodafone Idea's own estimate earlier had put the dues at Rs21,533 crore, but the Supreme Court (SC) barred telcos from self-assessing their dues and went with the DoT's claimed amounts.
In September 2020, SC granted telecom companies 10 years to clear their pending AGR dues to the Union government, with a 10% payment to be made every year.
In August 2022, Vodafone Idea, Airtel and Reliance Jio acquired spectrum at an auction. About 72,098 megahertz (MHz) of the spectrum was offered for auction, and out of that, 51,236MHz was sold. Reliance Jio bought the more expensive 700MHz in all 22 circles. The band has a range from 5km-10km, which gives good base coverage. Airtel acquired 19,867.8MHz spectrum in 900MHz, 1800MHz, 2100MHz, 3300MHz and 26GHz frequency bands.
The spectrum assets have a life of 20 years and telcos need to pay spectrum dues in 20 equal annual instalments at an interest rate of 7%. Jio, Bharti and Vodafone Idea will pay US$1bn (billion), US$500mn (million) and US$200mn per annum, including the interest component, respectively, for the spectrum purchases.
Jio was the largest spender in the latest auction, buying US$11bn worth of spectrum, followed by Bharti at US$5.4bn and the third-largest Vodafone Idea, buying US$2.5bn.
In a report at that time, Fitch Ratings had said, "Jio's and Bharti's network positions will pull ahead of Vodafone Idea as they have larger sub-1GHz spectrum and about three times Vodafone Idea's high frequency 5G spectrum. Sub-1GHz spectrum has better propagation qualities than higher-frequency spectrum." (
Read: Cash-flow Growth To Fund 5G Outflows for Indian Telcos: Fitch)
Vodafone Idea ended Monday 7.88% up at Rs7.53 on the BSE, while the 30-share Sensex closed flat at 80,004 points.
