Ensure money lent to telecom firms is given back: SBI

The State Bank of India (SBI) Thursday called for a mechanism to ensure that money refund should be made directly to lenders and added that even assets, including technical infrastructure, should be put under the hammer in the auction for 2G spectrum.

“Since the affected licensees have raised debt for their business plan and created security over their assets, any refunds should be routed directly in favour of the lenders, even if in some cases assignment of licenses in favour of lenders has not been completed,” SBI said in its response to the Telecom Regulatory Authority of India (TRAI’s) pre-consultation paper on allocation of 2G spectrum.

“Considering that substantial funds have been lent by banks to the affected licensees, to protect their interests, we suggest attaching/clubbing of the assets of the licensees to the spectrum proposed to be auctioned and any consideration received thereof used to set-off dues to the lenders,” it added.

SBI has funded exposure of Rs.1,100 crore to the affected telecom firms. According to SBI Deputy Managing Director Santosh Nair, the bank has also issued guarantees for the licences and has non-fund exposure to the tune of Rs.3,400 crore.

The Supreme Court has cancelled the 122 telecom licences issed in 2008 and has given four months to the companies whose licenses stand cancelled to cease operations.

Most of the affected companies have majority foreign stakes in their joint ventures with Indian firms, such as Oslo-based Telenor which has 67.25 percent stake in Uninor and Russia’s Sistema which holds 56.68 percent stake in Sistema Shyam Teleservices (SSTL) .

The lender has also suggested that the reserve price for spectrum be set considering the expected demand in the industry. It said if the reserve price is set too high, there may not be off-takers for the spectrum, whereas a low reserve price may lead to lower realisations to the government.

“The reserve price should be such that it enables a successful bidder to have an economically viable and bankable business plan within a reasonable period of time.”

“The experience in this regard has been that even at a level of Rs.1,650 crore entry fees paid by new operators, the operators have not been able to breakeven. The experience of 3G auction at Rs.16,750 crore for a pan-India spectrum has also not been encouraging so far.”