Banks may not fund spectrum buys if priced at high levels: SBI
New Delhi: 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.
While Airtel, Aircel, BSNL and MTNL have both BWA and 3G spectrum, telecom players Idea Cellular, Reliance Communications, Tata Teleservices, Vodafone and S Tel opted for only 3G spectrum in 2010 auctions.
Mukesh Ambani-led Reliance Jio Infocomm is only company to have pan-India BWA spectrum. Other BWA spectrum holders include Tikona Digital and Augere.
The bank said 3G spectrum holders will face tough competition when making voice calls on internet will be allowed. Under new telecom licence regime, government has made provision to allow making calls on mobile or fixed phone through VoIP service like Skype, Gtalk etc.
There are many companies who provide free VoIP service but calls from mobile and fixed phone are charged on per second or minute basis.
SBI suggested the government allow trading of spectrum through bourses or a common trading platform as it can not only ensure efficient utilisation, but also provide liquidity for the resource with players not having to wait for auctions, which take place only periodically.
"Further, steady availability of spectrum through exchange shall encourage competition and ensure that niche players requiring smaller quantities of spectrum are also able to compete in the market. The exchange can also be utilised by the government for release of additional spectrum as is the case in offers of sale for equity shares," SBI said.
The Department of Telecom is learnt to have recently approached TRAI for its views on allowing spectrum trading in the country, sources said.