Banks unlikely to fund spectrum buys at high prices

Banks unlikely to fund  spectrum buys at high prices
Highlights

Country's largest lender SBI has said banks may not lend for telecom spectrum purchases if prices are kept high, like in the case of 3G airwaves auction, as such funding is treated as unsecured loans. SBI apprehends that unsecured loans may lead to higher provisioning of amounts at risk in its financials, which may adversely impact credit rating.

Country's largest lender SBI has said banks may not lend for telecom spectrum purchases if prices are kept high, like in the case of 3G airwaves auction, as such funding is treated as unsecured loans. SBI apprehends that unsecured loans may lead to higher provisioning of amounts at risk in its financials, which may adversely impact credit rating.


"Holding unsecured assets on the banks books have in turn several implications.In case the future spectrum is priced at high levels, as in the case of 3G spectrum then lenders may not be in a position to fund these business plans considering the unsecured nature of the lending," SBI said in its comment to telecom regulator TRAI on spectrum valuation. 3G airwaves were auctioned in 2010 and fetched over Rs 67,000 crore to the national exchequer.


Telecom Regulatory Authority of India (TRAI) has earlier recommended around 11 times high spectrum base price compared to amount paid by telecom operators till 2008. The regulator used 3G prices as one of key benchmark for recommending reserve price for spectrum auction held in November 2012.


Telecom players have frequently raised issue of lack of finance for the sector. Following this government, roped in SBI in a tripartite agreement to facilitate funding for spectrum auctions that were held in November 2012 and March 2013. Indian banks have already suffered a jolt of around Rs 28,000 crore when telecom licences of their clients were cancelled by Supreme Court in February 2012.


SBI added that players who won wireless broadband spectrum (BWA), being used for 4G services, are better placed compared to telecom players who opted for 3G with regard to investments they have in infrastructure. "Therefore, it would not be appropriate to use the prices obtained in the 3G auction as a basis for spectrum valuation in 2013," SBI said.

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