A group of bankers and high profile financial experts has warned India’s Department of Telecoms that invoking the bank guarantees of Vodafone Idea would almost certainly lead to the telco defaulting on its payments, throwing the sector into financial chaos.
The group of creditors, who all have loaned money to Vodafone Idea, implored the DoT to find a solution in order to preserve the country’s three operator status.
“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,” an official told reporters from the Economic Times of India.
Vodafone Idea currently owes around $7.9 billion (57,000 crore rupees) to the Department of Telecoms, the vast majority of which is underwritten by bank guarantees. Should the DoT choose to call in those guarantees, as a way of eliciting payment from the beleaguered telco, the group of lenders has warned that Vodafone Idea is in no position to repay them.
Vodafone Idea has repeatedly called for the Indian government to intervene and help it devise a long term repayment strategy, warning that the company faces insolvency if an aid package is not forthcoming.