India mulls allowing spectrum as collateral

Dylan Bushell-Embling
27 Jan 2012
Daily News

India's finance ministry has proposed allowing operators' spectrum holdings to be used as lending collateral, in a move that could open some much-needed credit for the nation's telecom sector.

The ministry has asked the department of telecom to make policy changes that would allow banks to seize airwave licenses in the event of a default on loans or the revocation of mobile licenses, Economic Timessaid.

The ministry has also asked that lenders be part of any consultation before an operating license is revoked, and to be entitled to “termination payments” if a license is indeed cancelled.

This request is likely motivated by the telecom ministry's multiple over the last year to revoke some operating licenses for failure to meet rollout obligations.

It forms part of a package of changes proposed by the finance ministry as a means to convince banks to start lending to telecom operators again.

According to the Economic Times, loans for telecom players have all but dried up, due in part to operators' mounting losses and slow growth. Slower than expected uptake of 3G services is also contributing to the problem.

The total debt of the telecom industry is estimated to be around 2.75 trillion rupees ($55.65 billion). Telecom minister Kapil Sibal had earlier asked the finance ministry to address the problem of banks' reluctance to loan to the sector.

The finance ministry also wants the department of telecom to allow spectrum sharing by telecom operators, and make amendments aimed at facilitating consolidation in the crowded mobile sector.

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