Reliance Jio, Bharti Airtel and Vodafone Idea (Vi) have asked the Telecommunications Regulatory Authority of India (TRAI) to help them resolve liquidity issues. Telecom operators have asked the regulator to remove bank guarantees (BG) so they can free up working capital and use it to expand their mobile networks. According to a report by ET Telecom, telecom operators have suggested that BGs affect their business in two negative ways. First, it is a cost to them that reduces their cash flow, and second, government Communications Account Controllers (CCAs) use BGs to address apparent breaches of contract terms.
According to Indian telecom operators, merging the performance and finance BGs makes no sense. BGs are nothing more than an inefficient and expensive way to secure government dues, telecom operators say. Additionally, carriers do not want TRAI to remove or cut telecom entry fees. This would discourage non-serious players from entering the sector and also ensure that current operators do not face additional competition from new players.
In September last year, the government announced a relief package for the telecommunications sector, which addressed their liquidity problems. Telecom operators are now in a much better position. Airtel and Vodafone Idea had opted for the relief measures. The government is announcing further relief measures in the near future. It would be interesting to see if the regulatory body listens to private operators. BGs have been a pain point for operators for many years. This freezes thousands of crores of capital from telecom operators and affects their ability to grow faster with mobile networks. Rolling out 5G would require more capital, and TRAI needs to keep that in mind when looking at things. As for the non-abolition of entry fees in telecommunications, we do not know what TRAI’s appeal would be on this subject.