Govt Policy

Telcos can use spectrum as collateral for raising funds

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The Reserve Bank of India has approved the proposal to allow mobile phone companies to mortgage airwaves. This will move that will facilitate telcos to use spectrum as collateral and raise funds from banks for the upcoming auctions.
The RBI has said that banks will be allowed to seize airwaves in the event of a default or cancellation of mobile permits. Banks will enjoy the rights to sell, transfer, assign, exchange and dispose of the airwaves without any restraining conditions to protect their interests, the central bank said in May 30 communication to the finance ministry.

The finance ministry has endorsed the RBI stance and has asked the telecom department (DoT) to expedite policy changes to allow spectrum to be used as collateral by lenders of telecom companies, saying this will ‘boost the confidence’ of banks and allow mobile phone companies to raise loans.

The RBI nod is significant, as the Supreme Court has set an August 31 deadline to complete the spectrum auction. Trai had recommended that the reserve price for each unit of airwaves in the 1800 MHz band be set at 3,622 crore in the upcoming sale. The total debt of the telecom industry is estimated at 2,75,000 crore.

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