Sibal bats for easing telcos' cash crunch

Telecom companies, which are facing problems in getting loans from banks, have found an advocate in Telecom Minister Kapil Sibal.

Sibal has asked Prime Minister Manmohan Singh to call a meeting with Finance Minister Pranab Mukherjee in this regard.

Banks are wary of lending to telecom companies due to fear of attracting the attention of government agencies probing the alleged corruption in award of telecom licences and spectrum.

Sibal said many companies borrowed heavily to pay for 3G licences late last year. These companies were now facing difficulty in raising resources for the business, upsetting the calculations they had made while bidding aggressively for the licences, he said. The situation, if not remedied swiftly, could embroil the sector in a financial and legal quagmire, he added.

It is estimated that 60-70 per cent of the Rs 100,000 crore that operators paid for 3G and broadband wireless access spectrum came as loans from banks and financial institutions.

The companies also put in another Rs 30,000 crore to roll out services.

A substantial part of this too came from banks and financial institutions. This does not include loans taken for operating expenses.

With many banks — such as State Bank of India — with large exposure to the telecom sector coming under the eye of the investigating agencies, many of them are reluctant to lend more to the companies in the sector.

What has added to the concern is the Central Bureau of Investigation’s (CBI’s) preliminary inquiry into the term loans extended to companies that successfully bid for 2G telecom licences in 2008. This round of licence allotment is under the scanner of both CBI and the Supreme Court.

The companies are also facing problems in taking short-term corporate loans, as banks want greater clarity on end-use of funds.