Vodafone Idea Seeks Waiver of Rs.24,747 Crore on Spectrum Payment Guarantee

Vodafone Idea (VIL) has approached the Department of Telecom (DoT) seeking a waiver on a hefty financial bank guarantee (FBG) of Rs.24,747 crore. This sum, due in September 2025, is part of VIL’s obligations for spectrum acquired before 2022 as the company had opted for a four-year moratorium on spectrum payments under a government relief package, which is to expire between October 2025 and September 2026.

Moratoriums and Obligations

The moratorium, also covering AGR (adjusted gross revenue) payments until March 2026, allowed VIL to defer financial obligations. As per spectrum auction rules, VIL must secure the FBG at least 13 months before the moratorium’s expiry, a requirement the company is now seeking to amend based on regulatory changes.

Financial Strain & Govt Equity

With total dues to the government amounting to Rs.2,03,430 crore as of Q4FY24, VIL has been trying to manage its debt, the company cleared Rs.16,000 crore in interest obligations by offering equity to the government This total debt comprised Rs.1,33,110 crore from deferred spectrum payment obligations and Rs.70,320 crore in AGR (adjusted gross revenue) liabilities. By choosing the moratorium, VIL managed to address Rs.16,000 crore in interest on the deferred payments by providing equity in the company to the government, thereby reducing government shareholding from 33% to 23.8% by March 2024.

Recent Developments

In response to the pressure, VIL raised Rs.18,000 crore through a follow-on public offer and an additional Rs.7,000 crore from promoters between March 2022 and May 2024. The funds were used to issue preferential shares to vendors, settle dues, and stabilize the company’s position.

Conclusion: In conclusion, Vodafone Idea’s plea for a waiver on the Rs.24,747 crore FBG showcases its approach to financial restructuring amidst debt burdens. With regulatory change, the company aims to stay competitive in India’s telecom sector. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.