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Indian operators face DoT demand for guarantees worth $4.5 billion

Indian operators face DoT demand for guarantees worth $4.5 billion

India’s Department of Telecommunications (DoT) is seeking permission from the Supreme Court to demand new bank guarantees of around INR330 billion ($4.5 billion) from the country’s mobile operators.

Between the licence and spectrum usage fees that India’s operators owe to the government, the DoT argues that “huge public money” is at stake, according to The Economic Times.

In a filing with the Supreme Court, the DoT argued: “even with existing financial guarantees and withholding the performance bank guarantee of the licensee companies, it is not adequate security towards [the government’s] outstanding assessed annual licence fee and spectrum usage dues.”

India’s mobile market has been embroiled in a price war since Reliance Jio launched in September 2016. A spate of consolidation ensued as operators saw their margins squeezed, and profitability took a hit as they attempted to remain competitive.

The country’s three largest operators – Vodafone Idea, Bharti Airtel and Reliance Jio – all have substantial amounts of debt, so boosting their holdings as a bank guarantee will stretch them even thinner.

The DoT has for some time now been trying to recover spectrum usage and licence fees from several Indian operators, and is owed around INR780 billion. This amount could fluctuate as the fees are calculated based on adjusted gross revenue, and the Supreme Court may revise how this term is defined.

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