Government's BG relief to telecom industry will boost 4G and 5G investments in India

As per the telecom reform package of 2021, no Bank Guarantee (BG) was required to be provided for the spectrum auction held post reform package as the industry had matured and past practice of BG was no longer required.

Recently, the Department of Telecommunication, Government of India further extended its support to the telecom industry by dispensing with the requirement of Bank Guarantee to be submitted for spectrum auctions held prior to reform package i.e. for spectrum auctions of 2012, 2014, 2015, 2016 and 2021, provided the pro-rated value of spectrum used from the date of allocation till the end of three (3) months after the due date of payment of next instalment is less than the value of payment made by the telecom operator on an NPV basis.

Prior to this reform, BGs aggregating to ~Rs. 24,800 Crore were required to be provided by VIL against each spectrum instalment, 13 months prior to the installment falling due for the above auctions. As per our understanding of the terms and conditions, out of all the 5 auctions mentioned above, no BGs will be required to be provided by VIL for the 2012, 2014, 2016 and 2021 auctions. However, there would be a one-time partial shortfall only for the 2015 auction, where the NPV of all payments made would be less than the pro-rated value of spectrum used. We are in discussion with the DoT to determine the final amount of this partial shortfall for the 2015 auction.

This step of BG waiver is a clear indication of the Government's continued support to the telecom industry. It will ensure that the exposure of the banking system is utilized by telecom operators towards further proliferation of 4G and 5G networks in India.

Shares of Vodafone Idea Limited was last trading in BSE at Rs. 7.47 as compared to the previous close of Rs. 7.57. The total number of shares traded during the day was 28725439 in over 61995 trades.

The stock hit an intraday high of Rs. 7.62 and intraday low of 7.43. The net turnover during the day was Rs. 216453411.00.

Source : Equity Bulls

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VodafoneIdea INE669E01016 VI BankGuarantee