In credible India

Abu Saeed Khan
07 Feb 2012

The government has suggested that Indian mobile operators be allowed to borrow from the banks keeping spectrum as collateral. If an operator defaults or its license gets cancelled, the bank can confiscate the spectrum. India’s finance ministry has asked the telecom department to modify its policy to materialize the plan.


There are few points to ponder.




Spectrum remains worthless until a commercial wireless network emits signal through it. Theoretically all equipment associated with a mobile network should be bundled with the spectrum as collateral. Otherwise, a defaulted operator’s spectrum license would end up catching dust as a worthless piece of paper in the bank’s vault.


Yet it will be difficult to cannibalize a defaulted company's mobile infrastructure and sell the MSC, BSC, BTS and other bits and pieces of secondhand hardware to recover the outstanding debt. Therefore, all customers of the defaulted mobile network should also be included in the list of collateralized assets.


The voice and data traffic being generated by the millions of Indian mobile subscribers is the only bankable asset that qualifies to be collateralized. In simple terms, the government of India should allow the mobile outfits to merge with or be acquired by other entities.


The good news is the finance ministry has also suggested “the department of telecom... allow spectrum sharing by telecom operators, and make amendments aimed at facilitating consolidation in the crowded mobile sector.”


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