State Bank of India, the country’s largest lender, has sanctioned loans totalling ₹10,000 crore to six telecom companies to help them buy spectrum. Out of the total, the bank expects the companies to draw down about ₹3,000 crore, said P Pradeep Kumar, Managing Director.
Seven players, including Bharti Airtel, Idea Cellular, Vodafone India and Reliance Jio Infocomm, were successful in bagging spectrum. Upfront, these companies will collectively have to pay the Government ₹18,296 crore.
The companies that won spectrum in the 1800 MHz band will have to make an upfront payment of 33 per cent of the total bid amount and winners of the stronger 900 MHz spectrum, a 25 per cent upfront payment, before the end of this financial year. Following the upfront payment, the operators get a two-year moratorium, while the remaining amount ( ₹61,162 crore ) can be staggered over a 10-year period.
SBI Chairperson Arundhati Bhattacharya said: “We will only give money where we believe that they (telecom operators) will be in a position to handle the debt. We are not going to go out giving money to everybody.”
‘No competition’ She underscored that some of the telecom operators have good cash flows and may be able to manage payments. “Some of them have shareholders who are strong enough to bring in that kind of money (required to buy spectrum). So, I don’t really believe that the banking system is going to go and expose itself to any great risk in this scenario,” the SBI chief said. A senior Central Bank of India official said, given past experience, whereby the licences of telecom operators were cancelled, there was no competition among banks to lend.
“Caution is the watchword for banks. Competition is tough in the telecom sector. So, we will take a view on loan proposals based on the capacity of the companies to repay loans, previous experience with them and our exposure limits,” he said.
Reliance Jio Infocomm, the telecom unit of Reliance Industries, will need to pay about ₹3,800 crore upfront.
The company intends to use the cash on its books to make the payment, a source close to the development said.
Idea Cellular, the Aditya Birla group telecom company, is also not looking at loans.
The company, which needs to make an upfront ₹3,100 crore payment, has about ₹2,500 crore cash on its balance sheet and the remaining would be raised from internal accruals and rebalancing of debt, its Managing Director Himanshu Kapania said.
According to industry analysts, a number of players will look at external commercial borrowings as some lenders are wary of telecom companies following the 2G spectrum scam.