Don’t invoke Vodafone Idea bank guarantees: Lenders

MUMBAI: Vodafone Idea’s lenders met Department of Telecommunications (DoT) officials over the weekend, cautioning that invoking bank guarantees of the operator against statutory dues will lead to defaults since the telco is in no position to repay the banks. They urged the DoT to come up with a solution to retain a three-player telecom market.

“Lenders have informed the government that the situation is precarious as the sector is already reeling under asset quality issues. A default by Vodafone-Idea will not only require bank guarantee payments to be made to the DoT but will also be a burden on additional provisioning,” said an official who is aware of the matter.

“Bankers have requested the government to come up with a viable solution saying a three-telco model should be encouraged,” he added.

The lenders reminded the DoT that a bulk of VIL’s Rs 57,000 crore dues is supported by guarantees and if they are invoked, the banks will have to pay those to the government on behalf of the company. “Bankers told DoT that if the government invokes guarantees, VIL may not pay back (to banks),” said another person close to the matter. Vodafone Idea has said that it will close down if bank guarantees are invoked by the DoT, or if it doesn’t get any relief on its AGR dues.

The telco has so far paid only Rs 3,500 crore to DoT and according to an ET report, its self-assessment should show its dues to be around Rs 23,000 crore, of which Rs 7,000 crore is principal. Experts say the cashstrapped carrier will find it difficult to pay even its self-estimated dues in a short period of time.

These meetings are the latest in a slew of interactions between top government officials and the company’s representatives. In case of defaults, one of the major banks to be hit will be State Bank of India (SBI) which has an outstanding loan of Rs 29,000 crore to the telecom sector, but its largest exposure is to Vodafone Idea with Rs 11,200 crore. Private sector banks led by IndusInd Bank (Rs 5,000 crore) and ICICI Bank (Rs 1,700 crore) are the other major lenders to the beleaguered firm. Among public sector banks, Punjab National Bank has — at Rs 1,000 crore — the second highest exposure to the telco.

SBI chairman Rajnish Kumar on Tuesday said “Nobody wants to kill the sector, let me be very clear,” when asked about the woes of telecom industry under a debt of over Rs 7 lakh crore and now reeling under AGR crisis. Recently, he had said that bankers will have to pay the price if any troubled telecom company defaults. “Nobody wants to kill the sector, let me be very clear,” Kumar said.

Brokerage house Macquarie estimates Vodafone Idea debt at Rs 1.26 lakh crore, of which Rs 90,700 crore is in the form of deferred payment liabilities and guarantees towards spectrum charges payable over 16 years.