Telecom firms allowed to raise ECBs to pay for 2G spectrum

The government on Friday said telecom companies that win in the upcoming 2G spectrum auction will be allowed to raise cheap loans from overseas markets in the form the external commercial borrowings (ECBs).

"The successful bidders in the 2G auction would be eligible to refinance their rupee loans availed of from the domestic lenders for making the upfront payment with a long-term ECB under the automatic route," a finance ministry official told PTI.

The bidding for the airwaves is scheduled to start from November 12. The telecom industry had been seeking further easing of the ECB norms as banks are reluctant to lend money to the sector.

In order to develop the telecom sector, the government in January 2010 had provided a window of 12 months to successful bidders for the 2G auction for refinancing the rupee loan from domestic lenders to make payment for spectrum allocation with a long-term ECB under the approval route.

"Keeping in view the large outlay of funds required to be paid directly to the government within a limited period of time, relaxation has been provided for the upcoming 2G auction," the official added.

Finance ministry official said that bidders could also avail of short-term currency loans in the nature of bridge-finance under the automatic route for making upfront payment towards 2G spectrum allocation and replace it with long-term ECB under the automatic route, subject to certain terms and conditions. Next week, the government is auctioning spectrum at a minimum bid price of Rs 14,000 crore for 5 MHz of airwaves across 22 telecom zones.

The auction-based price is more than seven times that the carriers paid in earlier sales where airwaves were bundled with telecom permits. Airtel and Vodafone are among the telecom gianta that have applied to bid in the auction, but Reliance Industries and Russia's Sistema surprised by staying away.

Airtel and main rival Vodafone have only bid for additional spectrum in select few circles. Other players in the fray are Videocon, Telenor and Idea. The Reserve Bank, the official said, would soon be issuing the detailed guidelines for relaxing the ECB norms.