Bank guarantee waiver to help Vodafone Idea's debt funding plans, reduce financial burden

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Subscribe to enjoy similar stories. Vodafone Idea's plan to raise ₹35,000 crore may get a shot in the arm from the Union Cabinet's decision to waive bank guarantees from telecom operators for airwaves bought in auctions till 2022. The company had indicated earlier this month that the demand for bank guarantees had acted as a deterrent to raising funds.

Seeking bank guarantees was reducing the telco’s ability to raise debt since banks were not willing to offer up the guarantees, chief executive Akshaya Moondra said during an earnings call on 14 November. “It is very clear that the bank guarantee is something which the banks themselves will not be very willing to offer. They are trying to get debt funding, which will go towards making investments (and)...

help in improving our performance and then improving our cash generation. Bank guarantees will not have that result," he had said. The Union Cabinet approved a proposal to waive bank guarantees that telecom service providers need to submit for spectrum auctioned till 2022,Mint reported on Tuesday.

"This landmark decision will significantly help reduce the financial burden on the telecom operators," said S.P. Kochhar, Director General of the Cellular Operators Association of India, which represents private telcos in India. “We feel positive that this decision will enhance cash flow, free up capital and enable capital investments in network expansion and technology upgrades." The 'in-principle' approval comes with conditions, one being that if a telco’s bank guarantee is less than the value of the spectrum used on a prorated basis, it would have to pay the balance.