Airwaves Can Be Used As Collateral: DoT

With an aim to provide a financial cushion to, the debt-laden telecom op¬erators bidding in the ongoing spectrum auction, the Department of Telecommuni¬cations (DoT), before the start of auction process this year (read 2016), issued a notification permitting mobile phone companies to mortgage spectrum, which would allow these operators to use the airwaves as collateral to raise funds from banks and financial institutions.

The DoT has also issued guidelines which mandate the signing of a tripartite agreement among any operator, a lender, and the department for the purpose of mortgaging airwaves with a financial institution.

Why Dot Allowed Keeping Airwaves As Collateral?

The idea to allow using of airwaves as collateral was first raised in 2012 after the Supreme Court cancelled licenses and spectrum allocations of dperators, and banks became reluctant to lend to telecom com¬panies without collateral. After the cancellation of licenses by the apex court, the lenders were left without any assets to claim from telecom companies.

Previously, when spectrum was administratively allotted along with licenses, operators would raise funds from banks and financial institutions by keeping these licenses as col¬lateral. But once the unified license regime kicked in, spectrum was delinked from the license and now it can be obtained by companies through either auction, liberalizing their administratively allotted hold¬ing, or trading.

The industry, due to its infrastructure and spectrum costs, has been reeling under immense quantum of debt, which is to the tune of nearly Rs 3.80 lakh crore, and this liability is also creating pressure on the financial system of the country.

In 2013, before that year's auction exercise, the Telecom Regulatory Authority of India (TRAI) had recom¬mended to the DoT that it "should take up the matter (of spectrum as collateral) with RBI before the pro¬posed auction so as to ensure that commercial banks and other lending institutions are in a position to pro¬vide loans to the telecom companies for participation in the auction.

• The move would not only facilitate the financing of the telecom indus¬try but also mitigate the strg'ss of the banking sector while fulfilling the DoT's mandate regarding the spectrum management and would help DoT to harmonize the auction process, said the DoT statement.

  

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