Telcos cant mortgage spectrum: DoT Refuses To Sign Tripartite Agreement To Help Mobile Operators Raise Funds The telecom ministry has vetoed a plan to sign a tripartite agreement that would allow mobile operators to borrow from banks by using spectrum as collateral, arguing that a national resource cannot be pledged by private players to lenders. The department of telecoms (DoT) decision will be a setback for the cash-starved telecom companies ahead of the next round of spectrum auctions. DoTs objections relate mainly to the issue of control over lucrative spectrum as in case of a default by the operator, the spectrum has to be surrendered to banks, sources told TOI. DoT is of the view that control and the escalation in value should vest with the telecom ministry as it is the “requisite authority“ to take care of airwaves. Following the cancellation of licences and spectrum allocation by the Supreme Court three years back, banks are reluctant to lend without collateral as the decision had left them without any asset they could have encashed to recover dues. If spectrum is allowed as collateral, banks will have a charge on the asset. The telecom industry has a debt of around Rs 2.6 lakh crore and several major operators are under heavy stress, limiting their capacity to raise fresh funds. Telcos want to raise funds by keeping spectrum as collateral. Companies could earlier raise money by keeping licences as collateral but this was the case when spectrum was bundled into licence and was not auctioned separately .“However, things have changed in the auction era and the spectrum is sold separately,“ an official said. So, the way out for operators looking to raise funds is a tripartite agreement, which needs to be signed by themselves, banks and DoT.“However, this agreement has now emerged as the next area of conflict between DoT and the banking industry .The issue remains unresolved as there is no clarity on who gets control over air waves in case of a default.DoT is not ready to give this control to banks and has refused to sign such agreement,“ a top source in the telecom industry said. “The spectrum is a sovereign asset and thus banks cannot seek control over it.DoT is the only authority to get charge of the spectrum,“ an official said. The matter has now reached the finance ministry , which may finally strike a settlement between DoT and the banking industry . But, this looks unlikely before upcoming auctions in February .A nod to spectrum trading and sharing norms will also help sort out the matter as it would provide an immediate resolution for disposal of airwaves in case a company defaults.
Posted on: Sat, 24 Jan 2015 11:21:51 +0000