New Delhi, Sept. 23: The department of telecom (DoT) is in discussions with the finance ministry to ease the external commercial borrowing (ECB) norms, which will facilitate the purchase of spectrum by operators in the upcoming auctions.
Mobile firms, including Russia’s Sistema and Norway’s Telenor, have asked the government to amend the ECB guidelines to enable them to refinance funds raised for the auctions through the foreign route.
“The telecom minister (Kapil Sibal) will take up the issue of ECB refinancing for 2G auction bidders with the finance ministry,” said a DoT official. The government expects to earn Rs 40,000 crore from the sale of spectrum, whose auctions are scheduled for November.
For telecom operators, the move will help raise money at relatively lower rates from abroad as domestic lending rates remain high. Moreover, banks are reluctant to lend to the telecom sector — riven by corporate scandals — despite the government allowing spectrum to be used as collateral.
“SSTL (Sistema Shyam TeleServices Ltd) needs to do a bridge funding and then replace the bridge funding with long-term ECB funding. ECB guidelines do not allow for refinancing of the bridge funding. This should be provided as an exception,” Russia’s Sistema-backed CDMA operator MTS India said in a note to the DoT.
The note added that SSTL would not be able to raise funds through the ECB route for the fee payment since the number of circles and bid amounts were not known.
Operators have also asked the government to lift the cap of $750 million on ECBs. “The maximum limit of $750 million permitted under the automatic route should increase to the spectrum price payable by the winning bidder,” said an operator, which lost its licence following the Supreme Court ruling in February and is keen to win spectrum in the auctions.
Companies have also sought permission to pay the first tranche of payment, or 33 per cent of the bid amount that has to be paid upfront, through the ECB route.
According to auction rules, companies winning the spectrum will have to pay only one-third of the total price upfront, get a moratorium of two years and pay the remaining sum over a 10-year period.
Analysts said unless issues around valuation of spectrum were clarified, lenders would continue to avoid the sector, which was burdened by high debt and low revenues.
At present, telecom companies can use funds raised through ECBs for their capital expenditure requirements and buying spectrum. However, they are allowed to borrow up to $750 million and cannot refinance rupee loans.
In 2010, the finance ministry had made a one-time relaxation to the ECB rules and allowed telecom companies bidding for 3G spectrum to pay the fee in rupees and then raise overseas funds over a period of 12 months.