Telecom, FinMin differ on spectrum mortgage pact

Jul 10, 2012 |

New Delhi

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The ministries of finance and telecom have not been able to finalise terms of an agreement that will facilitate funding from banks for spectrum auction to be held before August 31.

According to official sources, Finance Ministry has asked Telecom Ministry to assign spectrum in the name of lenders to allow them to sell the airwaves if the spectrum winner defaults on payment later.

"Department of Financial Services has written to Department of Telecom that it will be necessary to assign spectrum allotted to operators in favour of lenders to boost confidence among lenders, but it has not been incorporated in the proposed tripartite agreement (TPA)," the sources said.

Both the ministries have jointly worked out a TPA in consultation with banks to ensure that lenders provide adequate loan to telecom operators who would win the airwaves in the proposed auction.

But the Telecom Ministry has not agreed to assign spectrum in the name of lender, which may discourage banks to provide financing for spectrum, sources said.

"We don't have any issue with banks being given preferential right for their dues but the spectrum auction process is a complex issue and it should by DoT only. EGoM will take final call on it," a Telecom Ministry official said.

The minimum price recommended for the airwaves is over Rs 18,000 crore for a new company which plans to start pan-India business.

The minimum amount that companies jointly will have to shell out in airwaves auction comes around Rs 81,000 crore.

A PriceWaterhouseCoopers report said that debt burden on telecom industry till March 2012 was around Rs 185,720 crore, of which domestic banks have funded Rs 93,594 crore.

In this report, PwC said the debt is to cash flow (EBIDTA) ratio in Indian telecom sector has risen from 3 in 2009 to 4.87 in 2012.

It explained that whenever ratio of debt against EBIDTA exceeds 3 in the telecom sector, it becomes difficult for operators to satisfy credit worthiness to banks for further lending.

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