Shares of Vodafone Idea, which stands to benefit the most by the return of the BGs, closed up 2.7% at Rs11.20 on the BSE. The Airtel stock ended flat at Rs762.15.
In an affidavit filed before the Supreme Court on Thursday, the Department of Telecommunications (DoT) said, “Pursuant to the Cabinet decision and in view of the fact that VIL and BAL had opted for such moratorium on spectrum auction installments and no installment is due necessitating security in the form of FBG (financial bank guarantees) till 13 months before the next payable installment post moratorium period, DoT has returned the existing bank guarantees submitted by VIL and BAL…”.
The relief package announced in September 2021 allowed telcos the option to pay the principal portion of the spectrum and adjusted gross revenue (AGR) dues to the government after a moratorium of four years.
DoT added that the BGs that were returned were for securitising the deferred annual spectrum installment payments for auctions held in 2012, 2014, 2015 and 2016.
The department, in its filing, did not mention the specific amounts worth of BGs that were returned. But an official told ET that BGs worth Rs15,000 crore were returned to Vodafone Idea and Rs7,000 crore were returned to Airtel.
In a statement to ET, Vodafone Idea confirmed that DoT has returned its BGs.
Airtel did not respond to ET’s emailed queries as of press time on Friday.
“…the government is returning the BGs and they will help ensure funds for telcos to reinvest in capex-heavy telecom networks and lead to growth in the sector and eventually to employment,” the official said, explaining the contents of the affidavit.
The official added that Vodafone Idea’s BGs were expiring on April 8.
ET reported in its March 7 edition that the government was planning to return BGs worth about Rs 15,000 crore to Vi and those worth Rs 7,000-8,000 crore to Bharti Airtel.
Vodafone Idea (Vi) has been urging the government to urgently release its BGs as the loss-making telco is desperately trying to raise cash to invest in its 4G network to better compete with stronger rivals Reliance Jio and Airtel and stem subscriber losses.
Return of the BGs will add to its lending banks’ capital pool, allowing the telco to tap more loans. It also needs capital to participate meaningfully in the upcoming 5G spectrum auctions.
In its affidavit, the DoT said it received Rs 84.41 crore from Hughes Communications India on March 31, 2022, towards its AGR dues. Additionally, the government has received Rs 8.24 crore from the official liquidator of the Bombay High Court towards the AGR dues of Etisalat DB Telecom that exited India after the top court’s 2012 order, cancelling 122 telecom licenses.
The DoT had withheld the BGs of Vodafone Idea and Airtel submitted for payment for spectrum dues as guarantee against future adjusted gross revenue (AGR) payments in accordance with the Supreme Court’s direction in its AGR judgement.
The telcos also had the option to convert the interest that accrues on the deferred dues into government equity. Vi exercised this option which, according to analysts, will give it cash flow relief of around Rs 1 lakh crore over four years.
Airtel has opted only to defer its payments.
Vi had told DoT that potential external investors were seeking clarifications on the return of BGs as well as what the government stake in the company would be after the equity conversion and the exact total AGR dues, as the loss-making service provider races to raise funds.
Calculations to be finalised
According to Vi’s calculations, the government would hold nearly 36% in the telco post conversion, making it the largest shareholder. The calculations need to be confirmed by the government.
The government recently said in the Lok Sabha that Vi’s balance AGR dues amounted to Rs 59,236 crore, while those of Airtel and Tata group were Rs 31,280 crore and Rs 12,931 crore, respectively. “Dues are up to 2018-19 and subject to revision on the basis of representations by TSPs, departmental assessments, CAG/special audits, court cases,” it said.