Govt’s bank guarantee waiver to cut financial burden on telcos, boost digital infra: Industry

Hailing the government’s landmark decision to waive bank guarantees for telecom spectrum acquired before 2022, industry players on Tuesday said such supportive policy measures are instrumental in creating an enabling environment for technological innovation and boost digital infrastructure, especially in rural areas.

The decision is expected to offer significant relief to leading telecom companies, especially Vodafone Idea, which collectively owe over Rs 30,000 crore in bank guarantees to the government.

“We welcome the Union Cabinet’s move and thank the government on approving the waiving of bank guarantee for telecom operators on spectrum purchased before 2022. This landmark decision will significantly help reduce the financial burden on the telecom operators in the country,” said Lt Gen Dr SP Kochhar, Director General, Cellular Operators Association of India (COAI).

The Department of Telecommunications (DoT) had earlier proposed the move, responding to industry demands for relief. Telecom companies had written to the DoT, urging the removal of bank guarantee requirements for pre-2022 spectrum acquisitions.

This decision builds on the 2021Cabinet reforms, which waived the need for bank guarantees on spectrum acquired prospectively.

“While we are studying the details of the decision and will be able to have a more substantial view of the same, we feel positive that this decision will enhance cash flow, free up capital and enable capital investments in network expansion and technology upgrades, ensuring a stronger and robust rollout of telecom networks in the future,” said COAI.

Vodafone Idea is likely to submit bank guarantees totalling approximately Rs 24,600 crore. Its share closed over 9 per cent at Rs 7.61 apiece on Tuesday.

The September 2021 telecom reforms had provided telcos with a four-year moratorium on spectrum payments and adjusted gross revenue dues.

Digital Infrastructure Providers Association Applauds Cabinet’s Strategic Move to Waive Bank Guarantees for Telecom Spectrum

Manoj Kumar Singh, Director General, Digital Infrastructure Providers Association (DIPA), said the waiver, which extends to spectrum acquisitions made prior to 2022, builds upon the forward-thinking reforms initiated in 2021.

“By removing the bank guarantee requirements retroactively, the government has created a more flexible financial environment that will enable telecom operators to optimize their capital allocation, enhance liquidity, and accelerate infrastructure investments. This decision is particularly significant for operators like Vodafone Idea, who have been navigating complex financial challenges,” Singh added.

Bank guarantees have traditionally locked substantial capital, with telecom operators typically maintaining 3-5 per cent of spectrum auction value as guarantee, translating to hundreds of crores of rupees.

By removing these guarantees for pre-2022 spectrum acquisitions, the government is effectively unlocking critical working capital that can be strategically reinvested in network infrastructure, technology upgradation, and expansion of digital connectivity.

“Bank guarantees have been a significant financial constraint for telecom operators. This waiver will provide immediate liquidity relief, enabling operators to redirect financial resources towards critical infrastructure development, especially in underserved and rural regions,” said Singh.

The timing of this intervention is particularly crucial. As India rapidly advances towards 5G deployment and prepares for the upcoming 6G stack, such supportive policy measures are instrumental in creating an enabling environment for technological innovation, said DIPA.

(With inputs from IANS)