News & Analysis

Telecos Want Govt. to Scrap Bank Guarantees 

In other words, they want no control from government on the property that it has leased out - yes, we are referring to the airwaves

Trust India’s big guns to seek every form of rebate from the government that they can hope for. Having first battled for India’s airwaves, the three key players have now gotten together to ask for scrapping of the bank guarantees that the government usually seeks in order to ensure that those involved stick to their financial and performance obligations. 

Reliance Jio has joined Bharti Airtel and the ailing Vodafone Idea (VI) to make this plea on grounds that removing bank guarantees would free up more working capital for the expansion of the mobile broadband networks. Of course, minus this financial clause, the government could be left sucking its thumb if any of the three renege on their obligations. 

The three companies submitted to the Telecom Regulatory Authority of India (TRAI) that the bank guarantees impose additional costs on operations and also becomes a coercive tool that the controllers of communication accounts (CCAs) in the government use to settle breach of contract conditions. In other words, heads they win, tails also they want to win!! 

They further claim that there is no need for merging performance and financial bank guarantees on grounds that they are both inefficient and costly modes of securitizing government dues. As if this wasn’t enough, the three companies went ahead and entreated TRAI to refrain from reducing telecom entry fees to stop what they term as “non serious players”. 

Are we seeing the beginnings of a monopoly that the Indian telecom industry would become? Especially when the third leg of this tripod is weak and could end up being subsumed by the bigger two over a short period of time. 

Of course, the original sin can be attributed to TRAI which sought the telco’s views on bank guarantees and whether performance and financial guarantees needed to be merged for all telecom permits and whether it was a good time to reduce telecom license fees. We are still trying to figure out why TRAI would even go this route? 

While Reliance Jio was categorical that licenses and authorizations should be discontinued as they feel it doesn’t serve any purpose. Which is equivalent to stating that the country’s airwaves belong to them because they’ve paid for it. By the same logic anyone attempting to bottle Gangajal could claim the entire river!!! 

Archrival Airtel sought the removal of guarantees but Vi wanted the merger of both performance and financial bank guarantees though asked for the quantum to be reduced to half of what it was now. Rather funny that the company that could benefit the most from scrapping the bank guarantees is the one arguing for it’s existence in a reduced avatar!  

Leave a Response