Mumbai/IBNS: Telecom stocks surged on Tuesday (Nov. 26) following reports that the Union Cabinet approved waiving bank guarantees (BGs) for spectrum purchased before 2022.
This decision brings significant relief to financially struggling operators like Vodafone Idea (Vi), which owes over Rs 24,700 crore in BG obligations, according to Moneycontrol.
Collectively, domestic telecom players, including Bharti Airtel and Vi, hold more than Rs 30,000 crore in such guarantees.
The cabinets move extends the benefits of its 2021 reforms, which eliminated BG requirements for spectrum acquired in future auctions, to older holdings.
The initiative aims to alleviate financial stress within the telecom sector and bolster its stability.
Vodafone Ideas shares soared by 18.79 percent to reach Rs 8.28 on the NSE.
Tata Teleservices Maharashtra (TTML) climbed nearly 12 percent to Rs 77.18 on the BSE, while Mahanagar Telephone Nigam Limited (MTNL) rose approximately 5 percent to Rs 49.60.
The BSE Telecommunication index traded 0.65 percent higher at 2,860.01 during the session.
Vodafone Idea, which has been vocal about its financial difficulties, had sought government intervention to waive BG requirements.
The company argued that removing these obligations would free up credit from banks, helping ease its financial strain.
In August, the Cellular Operators Association of India (COAI), representing private telecom firms, also urged the Department of Telecommunications (DoT) to extend the BG waiver to spectrum auctions held before 2022.
ICICI Securities, in a recent report, projected a 1520 percent tariff hike over the next 15 months, which could help Vodafone Idea improve revenue, EBITDA, and free cash flow.
Despite robust gross subscriber additions, the company continues to face high customer churn.
However, it expects its 4G rollout to enhance customer retention and support a growing subscriber base, according to the brokerage.
The cabinets decision marks a significant step toward reducing financial burdens in the telecom sector, with ripple effects seen across the stock market.
