Bank Guarantee Waiver: How Will It Affect Telecom Companies’ Services? Vodafone Responds

The Department of Telecommunications (DoT) has waived the requirement for bank guarantees tied to spectrum auctions held before the 2021 reform package. Vodafone Idea Limited (VIL) has remarked this decision as a “relief,” stating it will redirect resources towards enhancing 4G and 5G network expansion across the country.

Previously, telecom operators were required to furnish bank guarantees amounting to Rs 24,800 crore per spectrum instalment, 13 months before the payments were due. However, this mandate has now been relaxed for auctions conducted in 2012, 2014, 2015, 2016, and 2021, as per the latest filing by VIL to the Bombay Stock Exchange (BSE).

While the waiver applies to most previous auctions, Vodafone clarified that a partial shortfall remains for the 2015 auction. The company is in talks with the DoT to finalise the amount for this shortfall, as it hinges on whether the net present value (NPV) of all payments exceeds the prorated spectrum usage value.

Vodafone highlighted that it would allow operators to channel their financial resources toward expanding digital infrastructure. “This decision ensures that banking sector exposure is better utilised for rolling out advanced 4G and 5G services,” the company said.

Experts believe the waiver could ease cash flow constraints for companies like Vodafone Idea, enabling a stronger push for modernising network capabilities and improving service quality.

The 2021 telecom reforms had already exempted operators from providing guarantees for spectrum acquired in auctions post-reform. Now, with the latest extension covering earlier auctions, the DoT aims to reduce financial pressure on operators, fostering growth in the industry.

Shares of Vodafone Idea, which have faced a volatile trajectory, closed at Rs 7.47 on Friday, down 1.19%.