Millennium Post

Spectrum winners can raise upto $750 mn via ECBs: Govt

Successful bidders in spectrum auction are allowed to avail of loans of up to $750 million (about Rs 4,671 crore) from foreign sources through external commercial borrowings (ECB) route for paying airwaves price, Parliament was informed on Friday.

‘As per the extant ECB policy, successful bidders of spectrum allocation...are permitted to avail ECB up to $750 million per financial year for the purpose of payment of spectrum allocation,’ Minister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha. The ongoing spectrum auction has seen bids crossing Rs 52,600 crore mark in first five days since it started on 3 February.Eight telecom companies — Reliance Jio Infocomm, Vodafone, Airtel, Aircel, Tata Teleservices, Idea Cellular, Telewings (Uninor) and Reliance Communications — are bidding for airwaves. Successful bidders get spectrum for 20 years.

Bids worth Rs 30,754 crore came for 2G spectrum in the 1800 MHz band and Rs 21,935 crore was for the premium 900 MHz band.
Telecom companies opting for paying this amount have choice to pay 33 per cent for airwaves in 1800 Mhz band and 25 per cent for 900 Mhz band spectrum.

Rest of the amount can be paid in 10 annual installments after a moratorium of 2 years. Before November 2012 auction, telecom companies had raised issues that banks are hesitating in giving them loans following increase in their debt and uncertainty prevailing in the sector after the Supreme Court cancelled 122 2G telecom licences in February 2012. Government had then facilitated a tri-partite agreement (TPA) in which it was one of the party along with bidders and banks in 2012.

The external commercial borrowings (ECB) rules were also relaxed in the same year. Under the TPA, telecom companies were allowed to raise fund for funding payment that they have to make for spectrum won in auction.

However, DoT on 2 January had clarified ‘TPA shall be modified. At present, spectrum cannot be mortgaged.’

The minister said that successful bidders making the upfront payment for the award of 2G spectrum initially out of rupee loans availed from the domestic lenders are eligible to refinance such rupee loans with a long term ECB.

However, the long term ECB shall be raised within a period of 18 months from the date of sanction of such rupee loans for the payment of spectrum price.

‘The successful bidders in 2G auction are also allowed to avail of ECB under automatic route from their ultimate parent company without any maximum ECB liability-equity ratio subject to the condition that the lenders holds maximum paid-up equity of 25 per cent in the borrower company,’ Meena said. The rules also allow successful bidder to avail short term foreign currency loan in the nature of bridge finance under the automatic route for making upfront payment and replace the same with a long-term ECB, he added.
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