Tata Tele taps LIC, banks to pay for 3G bids

Raises over Rs 4,500 crore through bonds and loans.

Tata Teleservices has raised over Rs 4,500 crore to pay for 3G spectrum and finance its rollout through a combination of bonds floated by the company as well as loans from commercial banks.

Life Insurance Corporation has subscribed to 10-year bonds floated by TTSL for Rs 1,000 crore. It also raised another Rs 1,000 crore through commercial paper with a tenure of one year from various institutions.

The telco has also raised money directly through banks, which include Rs 1,500 crore for a tenure of five years and Rs 1,135 crore for one year. The yearly interest rates of the bonds and the loans range from 7.33 per cent 8.3 per cent, say sources. Among the banks which financed TTSL's roll out are Central Bank Of India. The deals were closed last evening, according to sources in the company

Top executives in the company said the interest rates on the bonds were as low as seven per cent, an attractive rate. The company is planning to convert part of the short-term debt into long-term loans and says both the domestic option as well as going in for external commercial borrowings (ECBs) is a possibility.

TTSL has to pay Rs 5,864 crore for winning 3G spectrum in nine of the 22 telecom circles across the country in the next few days, for which the money has been raised. Senior executives said the company would require another Rs 1,500-2,000 crore to lay its 3G networks in locations where it won the spectrum. The amount could go up substantially, to around Rs 4,500 crore, if the government decides to ban the use of Chinese equipment. Says a senior executive of TTSL: "As our network was from the Chinese, we (will) have to swap networks and this will add to our overall costs."

The 3G auctions concluded recently and helped the government to raise over Rs 67,000 crore as revenue, surprising most analysts. It was much higher than the government's own expectation.

TTSL has won 3G spectrum in circles which constitute 47 per cent of telecom revenues. It paid 35 per cent of the value of a pan-India licence as spectrum fee. In those circles, 51 per cent of households have a annual income of less than Rs 1.5 lakh.