Fin Min for using spectrum as collateral security

With the banks dithering to give loans to telecom companies, the Union Finance Ministry said financial institutions can take spectrum as collateral security for lending and hold complete rights to transfer, sell or exchange the radiowaves if borrower defaulted.

If the Group of Ministers (GOM) on Telecom, accepted this suggestion, then it would ease the borrowing problems faced by telecom companies whether it is for raise funds for acquisition or network rollout or expansions.

The Finance Ministry in its suggestion to the GOM also said that even if any telecom companies lost its spectrum due to cancellation or voluntary surrendered by the company, the right of spectrum should be with the lenders.

To protect the lender’s interest, there will be tripartite agreement between lender, Department of Telecom and a telecom company, said the proposal submitted to the GOM. 

The Finance Ministry also said that the DOT should specify the methodology adopted for evaluate radio waves when it used for fledging.

However sources said that the final decision on this will be taken only by the new government coming to power at the Centre as existing GOM headed by Finance Minister P Chidambaram is unlikely to meet at the fag end of the tenure of the UPA II government.

Though earlier the Finance Ministry had refused to accept the suggestion of using spectrum for raising funds as radio waves is government property, it changed its stand after telecom operators urged the government to allow them to use radio waves to raise funds.

With the mounting debt from telecom companies especially after  2G scam, the banks were wary to lend telecom operators and they have sought the clarity from the government on this is issue.

The collective debt of telecom sector stood Rs 2.08 lakh core, while as on December 2013, sector’s debt recast proposals worth Rs 10,785 crore loan pending with the corporate debt restructuring cell.