Dot May Agree To Fi Terms On Assignability

The department of telecommunications is likely to agree to a demand by financial institutions that it take on the liabilities of a private licensee in case the company defaults on loan repayments and there is no new taker for the licence.

FI representatives had appraised top DoT officials of their decision at a meeting to discuss the issue of assignability of telecom licences last week.

Assignability enables the transfer of telecom licences to lenders or another company in case the licensee company defaults on loan repayments.

Although initially DoT officials were opposed to the idea, they are now veering towards accepting the demand. The possibility (of DoT having to assume liabilities of a defaulting licensee company) is very small. After all, the FIs would have done their appraisals and will fund them only if the (telecom) projects are sound. Therefore, the business risk is very small, a senior DoT official said.

Further, most of the projects are going to be funded on a recourse basis. Loans with recourse allow lenders a lien on assets of associate companies or the promoters themselves. This will allow the FIs to recover most of their loans in case of a default. We think the residual risk will be minimal and are willing to take it, the official added.

DoT is expected to convey its assent to the FIs at the next meeting scheduled after telecom secretary A V Gokak returns from deliberations at the World Trade Organisation in Geneva next week. The sticky issue of assigning licences to foreign lenders will also be taken up at the meeting, sources said.