FinMin allows telcos to raise ECBs to pay for spectrum
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In time for the 2G spectrum auction that kicks off on November 12, the finance ministry has allowed telecom companies that bid for airwaves to access cheaper funds from abroad by relaxing norms for raising external commercial borrowings (ECBs).
"Keeping in view the large outlay of funds required to be paid directly to the government within a limited period of time, relaxations are provided for the upcoming 2G spectrum auction," an official release on Friday said. Starting next Monday, the government will auction GSM spectrum at a minimum bid price of Rs 14,000 crore for 5 MHz of airwaves. With the auction price about seven times higher than what was charged originally when airwaves were bundled with telecom permits, telecom firms have complained that banks are reluctant to lend.
Accordingly, the finance ministry has allowed successful bidders in the auction to refinance rupee loans availed from domestic lenders for making the upfront payment with a long term ECB, under the automatic route. Bidders can also avail short term funds under the automatic route to use as bridge loan for making upfront payment towards 2G spectrum allocation and replace it with long-term ECB under the automatic route. The finance ministry has also permitted telecom companies to raise such funds through their ultimate parent company without any maximum ECB liability-equity ratio under the automatic route.
"The RBI will issue the relevant circulars to notify the EBC norms by next week," a finance ministry official said. Airtel and Vodafone are amongst the main applicants in the fray that have decided to bid in the auction. Others that will participate in the auction are Videocon, Telenor and Idea. But other telcos such as Russia's Sistema have opted to stay away.
The Budget 2012-13 has pegged revenue from 2G auction at Rs 40,000 crore, which finance minister P Chidambaram said would be achieved.
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