AGR: DoT accepts telcos’ plea to accept bank guarantees valid for 1 year


The Department of Telecommunications (DoT) has accepted a petition from mobile phone companies seeking a truncated tenure for bank guarantees with a validity of one year instead of the mandated three as lenders are reluctant to provide fresh backing for a longer period.
and – both loss-making and facing cumulative adjusted gross revenue (AGR) dues of over Rs76,000 crore – are said to be in talks with (SBI), and for fresh guarantees ahead of airwave auctions that start March 1.

The telcos need to provide bank guarantees to back their earnest money deposits (EMD) to bid in the auctions and to cover for their annual instalment amounts towards the airwaves they buy in the sale.

A banker in the know said that he was in talks with the two telcos to iron out some differences.

“The reluctance to sign off on bank guarantees is largely due to the uncertainties on the policy decisions the government would take…we are just getting out of one AGR hassle and then to commit to another round of bank guarantees we have to be sure about the future growth and financial performance of these organisations,” said an official in the know.

The deadline for applying to participate in the auction has been extended to February 9 from February 5, giving telcos more time to thrash out differences with the banks.

Analysts say Bharti Airtel is much better placed financially, having raised $8 billion since October 2019 and its operational fundamentals quite strong, compared with Vodafone Idea, which is rapidly losing users, revenue and subscriber market share.

The telcos underlined their concern to the DoT pointing out banks’ reluctance to provide longer bank guarantees (BGs) given the financial stress in a sector under over Rs 8 lakh crore of debt.

“With the current state of telecom industry banks are not agreeable to issue BGs for validly longer than one year, hence it is requested that wherever the requirement is to secure amounts of period longer than one year, a one-year BG may be allowed, which can be renewed annually, the interest of DoT will be equally protected as in the case of failure to renew the BG were required DoT can always have the right to invoke the set BG,” said a request from from the operators. “This will help the applicants to better participate in the auction.”

The DoT has agreed to accept the terms of annual renewable bank guarantees. Though no telecom has been identified, sources said Airtel and Vi had made these requests

Airtel owes the government almost Rs 26,000 crore in AGR dues, while Vi needs to pay about Rs 50,400 crore. Both need to pay in 10 equal instalments through March 31, 2031.

Airtel, Vi and lenders did not respond to ET’s queries seeking comment.

DoT aims to sell 2,250 MHz of 4G airwaves across seven bands from March 1 worth Rs 3.92 lakh crore at the base price.

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