Telcos want RBI to relax external borrowing norms

Reeling under debts, telecom companies have approached the Reserve Bank of India (RBI), seeking relaxation in external borrowing norms.

The Association of Unified Telecom Service Providers of India (Auspi), an industry association representing CDMA operators, has written to the Department of Economic Affairs, saying telecom operators should be allowed to refinance the rupee loans they had secured to pay for 3G telecom spectrum with external commercial borrowings (ECBs) by extending the initial one-year window by another six months”.

In its circular dated January 25 2010, RBI had given a one-time relaxation to prospective auction winners to arrange ECBs within a year to refinance their rupee debts. Most successful 3G bidders had tied up rupee debts for paying the government, which were partially refinanced with ECBs within a year, after RBI approved of this. The telecom companies had availed of the ECBs in two tranches. For the first, they enjoyed the relaxation.

Auspi Secretary-General S C Khanna said telecom companies should be given a window of six months to arrange for ECBs in the second tranche for refinancing the remaining rupee debts.

However, an RBI circular in June limited the scope of telecom companies to raise ECBs by including a clause on export earnings, which gives benefits in raising ECBs to firms with foreign exchange earnings. “Telecom companies don’t have substantial earnings in foreign exchange. This clause would limit their ability to raise ECBs,” Khanna said.

Telecom firms had taken huge debts to bid for the 3G and broadband wireless access (BWA) auctions in 2010. Companies that secured 3G and BWA spectrum had collectively paid Rs 1 lakh crore to the exchequer. Till March, the debt burden of the Indian telecom industry rose to Rs 1,85,720 crore.

With average revenues per user decreasing, margins eroding and uncertainty on policy matters looming, telecom firms in India are finding it difficult to raise funds. According to a recent report by PricewaterhouseCoopers, if these companies bid for 2G spectrum at prices determined by the Telecom Regulatory Authority of India and opt for debt funding, the industry’s debt burden of Rs 1,85,720 crore would increase by Rs 2,72,000 crore over the next five years.

Earlier this week, Norwegian telecom company Telenor had also approached the finance ministry for a one-time relaxation in ECB guidelines so that it could extend a loan of $750 million (Rs 4,163 crore) to its Indian arm for financing the 2G spectrum fees in the coming auctions. The funds would also be used for running its operations in the country, it had said.